All about the national and international grain market and how grain contributes to farm inputs and costs.
International and national summary
National background comments: report for the week ending 15th November, 2019.
The next update will be on Friday 22nd November, 2019. Direct links to reports on each dairy region immediately follow this international and national summary for grain.
Driving Prices Up
Recently the USDA released their monthly World Agricultural Supply and Demand Estimates (WASDE) report which contained a slight decrease to the Australian and Argentinian wheat production.
- A firmer tone for CBOT wheat futures was also seen following freezing temperatures across the US plains. This has led to concern that there may be winter kill in key US winter wheat growing states.
- Dry conditions across the Black Sea countries has also led to concern for winter wheat crops looking for snow cover before their winter dormancy. The firmer tone following these weather concerns in the US and Black Sea countries were corrected reasonably quickly as the market remembered that this year will be a record large crop.
- However, there has still been some support for Black Sea cash prices that has led to support for CBOT wheat futures. A higher inland cash prices in Russia has led to an increase in port prices.
Driving Prices Down
Record large wheat production and end stocks continue to provide an underlying softer tone in CBOT wheat markets. The amount of reliable supply that is available will lead to a restriction on how high CBOT wheat futures can move.
- An overexuberant response from the market following dry conditions in Black Sea countries and possibility of US winter kill was corrected the following session with CBOT wheat futures handing back gains.
- Black Sea area planted is expected to increase in the coming 2020/21 season, this may lead to forthcoming weakness in the futures markets. If there is solid snowfall in the coming month this will bode well for Black Sea winter wheat crops over the winter dormancy period.
Global Trade News
US and China trade relations continue to dominate global equity and commodity markets with volatility and uncertainty seemingly increasing.
- Recently the Chinese government have been looking to crackdown on violence in Hong Kong, whilst the US President has not agreed to roll back tariffs as initially thought when the “Phase 1” deal would be signed.
- However, the US Government have stated that there would be nothing that the US can leverage should they roll back tariffs in phase one of the deal.
- Recently, glyphosate has been banned in Thailand (the fourth largest importer of Australian wheat and barley). This will eliminate the export of any Australian crop which has been pre-harvest desiccated with glyphosate.
- Russia is looking to focus their wheat exports on Sub-Saharan Africa destinations. Russian exporters are keen to carve out market share of one of the largest expanding continents; expecting to have the largest population increase in the coming 30 years.
- Harvest progress is currently in various stages across the country and, broadly speaking, prices have remained firm with the downward harvest pressure on prices that some were expecting not yet in the market.
- In terms of overall national crop size, finishing rainfalls in Victoria and SA have helped wheat and barley crops.
- As harvest ramps up in these areas we should start to see some more liquidity, and potentially volatility in prices, with grain growers in northern grain areas generally having held tightly onto the crop they managed to get off.
Price change in table below reflects moves since previous report (1st November, 2019)