Grain Wrap | Caution on the horizon for barley's market

Caution on the horizon for barley's market


Grains
Lower international demand has created lower new crop barley prices for 2019/20.

Lower international demand has created lower new crop barley prices for 2019/20.

Aa

If you have been watching the futures market during the past four weeks, you would be forgiven for feeling a bit like a nervous wreck.

Aa

Well, if you have been watching the futures market during the past four weeks, you would be forgiven for feeling a bit like a nervous wreck.

The first two weeks saw the market go down by nearly US45 cents a bushel and there were more losses in the market than Carlton and the Wallabies combined last year.

Meanwhile, during the past two weeks there has been a slow climb and recovered about half the losses it sustained when it started to free fall.

The question I had was why did it fall so much?

"Technical fund selling" was the answer that I was given.

I'm no screen jockey, but I really think somebody spilt their coffee on the key board and hit the "sell" button while cleaning it up.

In saying that, one must start to ask themselves if wheat is showing high volatility, now coupled with the potential for a drier outlook over the next three months, what can we sow to reduce the risk while providing stable price and yield?

Barley has typically been your number one choice.

Since the 2015/16 harvesting the once "ugly duckling" has risen to be a very useful income earner due to its high domestic and export demand, outstanding yield, and the ability of production in the hardest of Australian climates.

It has been the saviour of many people over the past 12 to 18 months, but now caution is on the horizon.

As I have said previously in articles, there is no Chinese pricing direction due to the alleged dumping of the grain into their domestic market; an investigation currently ongoing, but no outcome as yet.

We also have Saudi Arabia, who are another large importer saying that we are just too dear on the world market, which is due to east coast demand.

So without these two major importers putting pressure on the local market, the outlook is not looking great.

As expected, with lower international demand creates lower new crop prices.

The 2019/20 new crop barley port pricing is only $265 a tonne.

Bring that back to a farm gate price in the Central West of $210/t to $215/t, it's not a very inspiring indication, although we all know the market can move quickly at times.

The problem is, if we have no buyers for export, carry over of stock from Western Australia and some type of crop on the eastern seaboard, things may get worse before getting better.

It could very well be a reality, while wheat farm gate for 2019/20 in the central west pricing of $285 to $295/t Australian Premium White grade, is not a bad number to start the season, and potentiality more marketing opportunities through pools and other price risk management programs.

My concern is that there may be an expectation that since barley has been good, it will continue to be good, and the grower looking to the past for future price direction could cloud the dangers ahead.

Please consider the prices that are on offer today and be mindful of some of the future uncertainty.

At the end of the day, nobody really knows what the price will be.

It's the stuff that falls out of the sky that will largely dictate the value for everybody involved, therefore keeping all options open and hedging your bets should be given some thought.

Aa

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