'BETTER three hours too soon than a minute too late." At the risk of sounding like a Shakespearian ponce, you've got to admit that in the case of southern Queensland grain markets, the bard had a point.
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Unexpected rain was the catalyst for a rush for the exits in supply deficit markets north of Narrabri last week - forcing delivered southern Queensland feedlot bids for sorghum down by $17 to $18 a tonne and 70/10 wheat and barley bids down by closer to $10/t to $12/t.
The fall in prices was exacerbated by less enthusiastic physical buying - with local feedlots having already pro-actively covered their wheat and barley requirements in a flurry of activity the week prior - following their intake of cheap New Year cattle purchases.
Sorghum - given it was trading at a premium to wheat - was already priced to ration demand in both domestic and export markets, and therefore fell the hardest of all.
Noteably, it was the trade rather than the grower who was the seller last week, indicating that while the rain has not yet been sufficient to boost production, market "shorts" may have been feeling less squeamish.
Additionally, relative activity between market zones may have generated greater acceptance that price has done its job by delivering regional spreads sufficient to cover the freight from supply surplus to supply deficit regions.
By road, it's a simple equation to work out that Australian Standard White (ASW) wheat can still be drawn on to the Darling Downs from as far afield as Condobolin, and feed barley makes sense all the way from Bendigo.
By boat, we probably pushed through the tipping point for barley in mid January when the "spread" between delivered Downs and (natural terminal port) Port Adelaide bids traded as wide as $115/t.
Since then, things have normalised a little - with South Australian bids holding steady for barley to slightly firmer for wheat, despite the price weakness in the north.
From a market psyche point of view, it is worth noting that it took a largely ineffectual - albeit unexpected - rainfall event to precipitate this modicum of price sensibility in Queensland and northern NSW.
Lets face it, an inch of rain following weeks of stinking hot weather and strong winds does not make a whole lot of difference to production prospects.
Bureau of Meteorology data now shows month-to-date rainfall figures for much of the Darling Downs of 25 to 50 millimetres, with northern NSW (Narrabri through to the Queensland Border) generally tallying between 10mm and 25mm for January.
Meanwhile, much of the Liverpool Plains has only managed 5mm to 10mm.
Typically, these totals now mark the driest January across the region for at least five years (following a dry winter and spring), and are less than impressive given this should be the heart of the wet season in the northern cropping zone.
What has potential to generate more of a difference - particularly in Central Queensland - is the tropical depression now brewing in the Coral Sea.
Right now, the sorghum crop in Central Queensland is probably less than 20 per cent planted, and while the window is already closing, current prices of more than $300/t (NTP) Gladstone will buy plenty more acres if the rain does come.
Additionally, any drought breaking falls further south resulting from the potential monsoonal influence would provide a shot of confidence over potential winter crop plantings - which are looking more and more precarious as each week passes without meaningful moisture.
The point is that, rain - or lack of it - from here on in in northern NSW and southern Queensland will have more an influence on new crop wheat and barley markets than it will on either the old crop or sorghum.
Meanwhile, for nearby deliveries, prices may have now retreated sufficiently in southern Queensland and northern NSW to unearth support.
Importantly, the take home points from last week's relative price activity are:
- Sorghum destroys almost all domestic demand at price parity with wheat in southern Queensland and;
- Regional price spreads appear to have exceeded "extreme" drawing arc levels in mid January - with an $110/t spread between delivered Downs and (NTP) Port Adelaide bids a reasonable benchmark level to monitor.
Trading beyond those relative levels probably has more to do with emotion than reality.
Matt Schmerl is the accumulations and pool manager for Pentag Nidera.
