WA's newest Grain customers - NSW & Qld
- By: "Farm Tender" News
- Cattle News
- Oct 12, 2018
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By Andrew Retallick, Market Check
As we enter the 2018/19 season, Australian grain balance sheets are already in the most precarious position in living memory. Grain prices have responded accordingly, with New South Wales (NSW) and Queensland (QLD) pricing such a premium to Western Australia (WA) and South Australia (SA) that it’s viable to send vessels around the coast to alleviate the shortfall in supply.
To provide some context, Market Check among many other private analysts are estimating that NSW and QLD will need to import over 3.5 million tonnes of wheat and barley in 2019 to cover domestic demand. This will for the most part be sourced from the traditional exporting states of SA and WA and represents 27% of the combined estimated wheat and barley crops for WA this coming harvest!
In terms of ending stocks this season, a strong export program (especially for barley) has depleted our reserves significantly to the point that we’re beginning the 2018/19 season with very little left over. The domestic market was simply not quick enough to rally the market sufficiently enough to stem the flow of exports.
This export pace was coupled with a deterioration of pastures across the EC, resulting in a significant increase in cattle-on-feed (COF) numbers, but also strong feed demand from livestock (especially sheep) farmers. The Australian Lot Feeders Association (ALFA) has reported cattle on feed numbers are at record highs in QLD and the second highest in NSW, which has expanded the feed demand base through the past season. Strong wool and lamb values have improved sheep feeding economics and have also warranted a big demand pull from livestock farmers who have been forced to buy in feed to supplement the lack of fodder/pastures. Both these dynamics have aided in the draw down of available feed grains across Australia.
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The question on whether we’ll import grain from overseas has been asked frequently this year. Technically it’s possible, but difficult to achieve as the number of origins permitted to export grain to Australia is very limited. We believe it’s unlikely that we import foreign grain due to the extensive red tape, but if ever there was a year, it’s this coming year ahead.
Whether we receive imports or not, the majority of the EC deficit will be sourced from SA and WA. The primary goal of the EC market is to price itself at such a premium that it’s feasible to buy feed grain from SA and WA and execute it into the EC domestic market. Every tonne of lost production on the EC, is just another tonne that needs to be imported, and thus one less tonne available to the export market. Therefore exporters from WA will need to have one eye on the international demand for Australian wheat and one eye on the EC domestic consumers who will become one of their biggest customers in 2019.
This all may seem doom and gloom, but in reality, the EC will not run out of grain. The national wheat and barley crop will be in excess of 22 million tonnes, depending on finishing weather conditions. This is more than enough to cover our national domestic consumption of approximately 12 million tonnes, without taking into consideration the potential of a sorghum crop. The job for the next 12 months however, is to move this grain from where it’s going to be, to where it needs to be and hope we get some rain along the way.
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