Grain Wrap | Cautious optimism for grain after the rain

Grain Wrap | Cautious optimism for grain after the rain


Grains
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While this rain was very beneficial, particularly in the Castlereagh river system, it is hugely important we see timely follow up rain.

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The Chicago market traded in roughly a US20 cents a bushel range last week.

The Chicago market traded in roughly a US20 cents a bushel range last week.

It has now been well over a week since NSW recorded some handy rains through north-eastern NSW and the Hunter Valley.

While this rain was very beneficial, particularly in the Castlereagh river system, it is hugely important we see timely follow up rain.

Many farmers who were fortunate enough to land sufficient moisture last weekend would have begun planting grazing oats and winter grazing wheats.

But as the week wore on and temperatures began to climb, the moisture seemed to slip further and further away from the sowing rigs, and by Friday sowing into moisture had ceased altogether.

It is a difficult task sowing into a dry profile and not really knowing when the next rain will come.

However the good news is with the increased temperatures, the seed that was planted on moisture should establish quickly and provide feed for hungry stock before too long.

This is a positive for growers that may have been feeding cattle or sheep for many months, if not years, in towns such as Coonabarabran and Coonamble.

The market globally has been range bound for the past week, meaning the Australian market has lacked direction with most of the wheat in the hands of traders around the country.

The Chicago market traded in roughly a US20 cents a bushel range last week, equating to approximately $6 a tonne in the May futures contract.

This meant little movement in local Australian prices week on week, as Australian Securities Exchange futures still remain well above export parity due to the ongoing dry conditions across much of the country.

So with all the wheat in the hands of the trade, and both the feedlot and milling consumers well covered for the next few months, where to now for the East Coast wheat market?

Well, it's the same question farmers face each and every day. It all depends on rain.

If we see a general planting rain greater than 50 millimetres, over the next three to four weeks, we will see a huge percentage of wheat and barley planted in the traditional timeframe.

If this scenario plays out, the market is at risk of gradually moving lower as the winter crop transitions through establishment into emergence and hopefully into tillering.

As the crop evolves the trade and consumers begin to get more comfortable with production and they will take the foot off pricing, knowing that production will be there come harvest.

However, if we miss a general planting rain, or, the rainfall is not general but variable (as the pattern has been recently), there is every chance the wheat market will begin to move a bit higher as weather premiums are built in and end use consumers begin to take some cover.

Our crop establishment period in Australia runs in tandem with the most volatile northern hemisphere period, and if there are any hiccups in the northern hemisphere combined with establishment concerns in Australia, the market could very well be set alight.

Conditions in the US remain quite cautious as well, due in most part to the devastating floods across the Midwest over the past three weeks.

This certainly has the wheat market on notice that any other issue could be promising.

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