Droughts and flooding rains impact market

Droughts and flooding rains impact market


Grains
The reduced area of corn sown in the US will drive the demand for wheat to replace corn in feed ration.

The reduced area of corn sown in the US will drive the demand for wheat to replace corn in feed ration.

Aa

In the US, weather continues to play havoc, delaying planting of the corn crops and causing flooding of wheat fields.

Aa

Talk about droughts and flooding rains.

In the US, weather continues to play havoc, delaying planting of the corn crops and causing flooding of wheat fields, which could end up reducing the size of both crops and downgrading the quality of the US crop.

The United States Department of Agriculture (USDA) Crop Progress Report released on May 28 showed that only 58 per cent of corn had been planted in the US, which is 32 per cent behind the five-year average for this time of year of 90 per cent.

Ohio and Indiana are furthest behind with just 22 per cent planted in both states.

Here in Australia, areas of the east coast are looking down the barrel of a third year of below par winter crop rainfall.

Most areas of Western Australia have had little rainfall since November of last year.

The result has been a rally in trade prices, reversing the downward trend that has dogged markets following harvest.

While the current weather rally has significantly increased wheat futures, our local wheat cash pricing has also skyrocketed by more than $40-$50 a tonne, depending on delivery location.

A month ago when I last wrote my article, a delivered a price of $370 a tonne at Griffith was achievable with no bids for new crop, but today it is $410 a tonne delivered at Griffith for 2018/19 wheat and new crop 2019/20 bid of $335 a tonne.

The majority of this price increase has happened in just over the last two weeks and all within the time frame of the notification of wheat importation hitting the headlines.

Most people thought that the market would crash, but that has not been the case.

As has been shown time and time again, the market does what the market wants.

The local domestic market undoubtedly has strengthened considerably and it does not matter if you are selling to feedlots, chooks or stockfeed processors - the opportunities for the seller to capture high prices are real.

Many are wondering whether the domestic price is going to stay firm.

Even if the east coast season turns around and local basis falls, the reduced area of corn sown in the US will drive the demand for wheat to replace corn in feed ration.

Opportunities for WA exportable surplus should place pressure on east coast pricing.

Availability may be limited, with the east coast exporters wanting a piece of the action too.

So in short, you would expect prices to stay relatively strong.

As always, there are a number of factors at play today, both in domestic and international markets.

It all seems a bit like groundhog day again in Australia.

By that I mean a repeat of weather driven markets with growers hoping for rain on one hand and wanting prices to stay firm on the other.

Reasonable rainfall events in wheat growing districts in both WA and on the east coast, are expected shortly.

From an international perspective, the next market movement is likely to come on the back of the next USDA Crop Progress Report, which is due to be released on Monday.

The backdrop to all of this are the ongoing trade tensions between the US and China.

Far from resolving themselves, indeed they seem to be escalating.

Aa

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