The global grain complex remains under pressure from nth hemisphere harvest selling pressure and near ideal conditions across the nth American summer cropping areas. In the past week both the United States Department of Agriculture and the International Grains Council (IGC) lifted global grain production forecasts by 1 per cent (pc).
This chart shows the prices for wheat, corn and soybeans traded on CBOT. Source: Chicago Board of Trade (CBOT)
Large wheat crop not yet in the bin
For wheat at least the market has been trading like a large harvest is already in the bin. While that may be the case across nth America, a significant recent deterioration in crops across mainland Europe has not been factored in.
Persistent rain across Europe is causing harvest delays, reduced yields and quality downgrades. Only 14 pc of the French crop is harvested compared to the 5-year average of 43 pc whilst crop condition ratings have taken a sharp step backwards amid thoughts the French crop may be down 15 pc. The German crop is expected to be down by 20-25 pc with internal protein spreads starting to widen indicating poor crop quality.
Limiting the falls in wheat has been a lift in demand. US weekly sales are running 49 pc above last year’s pace and just last week Egypt issued its largest tender (770,00 t) in two years and Algeria was in the market for a similar amount. Increased buying activity combined with European crop wobbles is increasing our confidence that global prices may have made harvest lows.
Australian growers have not sold into the falling market. In the south, crop worries have seen growers shut the silo door and premiums are starting to emerge in southern up-country consumptive markets, indicating that end users may still have some buying to do.
This chart shows the prices for APW wheat at major ports in WA, SA and NSW. Source: ProFarmer
In the north, end users and growers seem comfortable to wait and see with growers most likely to target chickpea sales rather than chase the cereal market lower.
Canola prices rally
The global oilseed market remains resilient despite it having the loosest balance sheet and a big US soybean crop on the way. The soybean market is also heavily reliant on Chinese demand which has been struggling. As substitutes, soybeans and canola are linked but some canola demand is inelastic (not substitutable) and as such canola can trade its own supply/demand fundamentals.
This appears to be what we are witnessing. Indicating the severity of European crop woes, European canola futures have rallied the past month up A$45 per t. Europe is the world’s largest canola producer and this price action reflects concerns about its production potential.
Australian prices are starting to firm as buyers look to cover shortfalls in European canola production but crop potential in many Australian canola growing areas is uncertain.
This chart shows canola prices at major ports in WA and SA. Sorce: Profarmer
Feed grains
The global feed grain complex is being weighed down by a pending large US crop which has so far navigated the growing season without a hitch. Last week the USDA predicted a large global corn crop and increased carryout which will create a drag on the global grain complex.
Some are expecting downward revisions to South American corn crops which may push a bit of export demand towards the US and aid corn prices.
Locally our feed grains - sorghum and feed barley - are better placed. The reopening of the Chinese barley market has left Australia with low carryout stocks, local feedlots are full and some prefer barley particularly in summer months, while crops in large barley growing areas in southern Australia are less than ideal. This should see feed barley trade local fundamentals rather than track corn values. While sorghum is working into export markets in containers.
This table shows grower trade bids for grain in major Australian grain markets.
Agronomy Update
There is not much to report from an agronomic point of view. Crops in most areas are in winter dormancy with soil moisture profiles gradually building and agronomists busy assessing yield potential and crop disease and formulating treatment plans for a little further down the track.
Rates the winter crop at 75 pc good/excellent in the central west and central tablelands and 80-90 pc good to excellent in northern tablelands and north-west. - Adam Little, Technical Services Manager NSW
Crops conditions are best across the Eyre and Yorke Peninsula with 50 to 60 pc of the crop rated good to excellent (average to above average yield potential). Only 30 pc of crops through the Riverland-Mallee and the Mid North have the potential to be average or better, while at this stage crops further south in the South East and Adelaide and Fleurieu Peninsula will be below average at this stage. - Lyndon May, Technical Services Manager
Rainfall has been variable with some areas still below soil moisture requirements for this time of the year. Crops are behind where they are ideally should be, which will put a higher reliance on spring rainfall to achieve average yields or better.
We are seeing signs of disease in many crops including canola and barley. With weather warming up we expect that these disease levels will rise, requiring management intervention. We have seen some small pockets of Green Peach Aphids and Diamond Back Moth. This has been noted at this stage with an expectation that we will need to have some control requirements this year. We are still assessing ha of crop grown but believe the canola area to be back by about 25 pc on last year. Wheat is the hard one to predict as addition plantings occurred after significant rainfall in eastern wheatbelt areas. - Bill Moore, Elders Technical Services Manager, WA
The information contained in this article is given for the purpose of providing general information only, and while Elders has exercised reasonable care, skill and diligence in its preparation, many factors (including environmental and seasonal) can impact its accuracy and currency. Accordingly, the information should not be relied upon under any circumstances and Elders assumes no liability for any loss consequently suffered. If you would like to speak to someone for tailored advice relating to any of the matters referred to in this article, please contact Elders.
Read previous reports
Cropping update - June 2024
Cropping update - late May 2024
Cropping update - May 2024