SEND her down Hughie. Good rains to start the week have injected at least some confidence that we might get a winter crop planted in northern NSW and Queensland - particularly with unsettled weather now forecast to remain until the weekend.
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Additionally, this rain is expected to extend along the east coast right through to the Riverina and northern Victoria where they don't necessarily need it as badly as in the north, but won't knock it back.
Some producers "got in early" locking in new crop wheat and barley contracts ahead of the front, at values close to $330 a tonne (NTP Brisbane) for Australian Premium White (APW) multi-grades and $320/t (delivered Downs) for 70/10 feed wheat for November/December delivery.
New crop feed barley traded at $290/t delivered Downs, while South Australian producers had also started actively locking in APW multi-grades at about $300/t (NTP Port Adelaide).
Widespread falls of 25 to 75 millimetres from the Darling Downs through to Central Qld by Tuesday morning had seen prices soften about $5/t in Newcastle, Brisbane and Gladstone - while export zones actually rallied about $5/t on stronger global values.
Whatever the case, historically these prices represent very strong physical levels this far ahead of sowing.
Despite the recent and forecast rain, the $20 plus premium for Brisbane/Newcastle new crop over SA port zones (for both wheat and barley) suggests the market is pricing in tight northern beginning stocks and uncertainty about the new crop outlook.
Rightly so, given we are still a long way short of filling in northern NSW/Qld rainfall deficits - and the fact this weeks rain will not create any more grain between now and new crop harvest.
Perhaps the larger impact will be on the demand side - if this rain can generate sufficient pasture growth ahead of winter to allow graziers to reduce supplementary feeding and hold back turning off stock into feeder markets.
Time will tell.
Whatever the case, with minimal stocks on hand, the grain market's function in southern Qld remains to either draw grain from further afield in order to plug the supply gap, or rally to a point that switches off demand and this should keep a healthy drought premium in play for some time.
Local supply and demand considerations aside, there remains a number of global developments that are providing good support below the market for Aussie grain:
- Dry conditions on the US Southern Plains, combined with their cold winter, continue to generate concern about Hard Red Winter wheat conditions as crops break dormancy.
- Political unrest in the Black Sea will likely bubble along for some time with several commentators doubting Vladmir Putin will stop at the Crimean Peninsular. The fear is that further Russian incursions into the Ukraine would create far greater supply and logistics disruptions than has been the case so far.
- Sovereign demand for wheat remains strong from various major importing countries.
- The Aussie dollar, although showing some recent strength, remains in a downtrend with some analysts suggesting deteriorating Chinese economic data will potentially add further pressure.
While all of this is good news for Australian grain prices right now, weather and politics are not necessarily the easiest to predict and you know our position on forecasting the Aussie dollar.
Importantly, producers who are considering forward selling new crop should understand the types of commitment they are entering into.
On this front, Pentag Nidera has changed the way we will be structuring grade spreads on multi-grade wheat contracts this year.
Under the new system, the grade spreads will be determined on the first day of transfer of grain against the relevant multigrade contract with Pentag Nidera, as per the grade spreads specified on the Pentag Nidera daily bid sheet at that time.
Matt Schmerl is the accumulations/pools manage for Pentag Nidera.