More questions than answers for Grain pricing

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By Warren Lander - AWB

With the devastation to many communities over the summer in New South Wales and Victoria, these events have really put life into perspective for many and the only real means of stopping this whole tragedy is rain (and lots of it) so let’s hope it comes soon.

As for the local East Coast grain market over the Christmas period, reduced offerings to the trade has not really increased prices for the last 10 days, with wheat in Central West New South Wales being quoted Ex Farm at $365/mt to $385/mt while delivery of wheat into Griffith has been in the range of $370/mt to $375/mt. Is this due to the trade wanting to have minimum stock on hand? Or could it be that as harvest has now finished in many places, grain execution by rail and road transport is ramping upmaking the availability of grain more consistent to the consumer, resulting in less spot demand?

Consumers are still keeping an eye on Southern Queensland and Northern New South Wales sorghum. Reports are saying that trade clients are now washing out of their contracts and end users are already looking at changing their diet ration to a more easily attainable and reliable product as there will be limited production. Reports have also indicated that there will be no new crop sorghum available anywhere on the Southern Downs, with Central Queensland the only possibility of production - and that’s only if it rains soon. Current conditions have production estimates for the 2020 sorghum crop as the smallest for a very long period.

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An assessment of the shipping stem confirms the reports that approximately 275,000mt of barley will be shipped out of the Western Australian ports in the month of January. If half of that barley ends up on the East Coast, the consumer is well covered for a period of time and demand from the trade will be reduced. With this happening, pressure could come onto prices out of Victoria with the grower eager to sell and not wanting to miss out on historically high prices. This could create an issue for New South Wales growers, with barley to sell. If they are forced to meet the market, it could result in a ‘’capping effect’’ for local Central West barley pricing. Another scenario is if the Victorian grower can continue to drip feed the market and force the price up, thus helping to maintain or increase pricing in New South Wales. Having said that, no one is really sure what is going to happen or where the market is going to go.

Regardless of what happens, the Victorian grower will continue to have a major effect on the price across the entire East Coast. With some very good yields being reported in Western Victoria and the Wimmera the grower there is likely to capitalise on good returns however if they choose to hold, the market will likely edge higher until another source of supply starts to compete, or rainfall arrives.

www.awb.com.au