Cereal grain markets are struggling to find their operating level as market rumours fly about, leaving both buyers and sellers unsure of the true supply and demand situation.
The issue is at its worst in the feed grain sector, where interest centres on how much northern NSW wheat will be downgraded and at what price farmers will be prepared to part with it.
Industry speculation suggests that many end-users through the Goulburn Valley were keen to get their hands on cheap shot and sprung wheat from the north and had not been buying until they saw the impact of the rain through NSW's north-west.
But early signs are that the rain was not quite so widely damaging as first thought.
ProFarmer managing director, Richard Koch, said in his weekly newsletter that downgrading in NSW was not as widespread as first feared, with losses primarily confined to areas north of Gilgandra.
Further south, cold and wet weather is proving a nuisance, but at present is unlikely to cause wholesale crop damage, although Victorian and South Australian farmers are concerned about a series of cold fronts due to hit this week.
Early reports from the southern wheat crop is that while yields are down, quality and protein levels are very good.
The major influence of the weather damage has been an increase in the pricing spreads between feed and human consumption grain, both in wheat and barley.
ABB's barley spreads in Victoria are a whopping $180/t difference between Malt 1 and Feed 1 paygrades, while in NSW, there is a $75/t spread between hard wheat and weather damaged wheat.
On-farm, given the support of local feed end-users, this is translating into a spread of around $100-120/t for feed barley.
Mr Koch said international markets supported the spreads, saying there would be ongoing demand for higher protein wheat, while international feed wheat values, dragged down by cut-price Black Sea exports, have a strong drag, although there is a likely to be a domestic premium for growers on the east coast.
Internationally, the Chicago Board of Trade (CBOT) has been slightly weaker, with March '09 futures slipping below US500c/bu, but there has been a rally this week.
Combined with the declining dollar, it means there should be little negative pressure on milling wheat prices.
Domestically, there is an issue trying to find the right product for end-users.
In Victoria there is a significant amount of high protein, high screenings barley.
Eastate Commodities trader Stewart Coombes said there was interest in F2 to F4 barley from feedlotters and piggeries, but that dairy farmers generally would stick to F1, as grades with more screenings were hard to put through their roller mills.
He said there had been interest in low grade barley, but primarily it was a sharp discount to F1 and producers were not necessarily keen to sell at the price.
Feed 1 barley is slowly finding its level at around $230/t delivered into the Goulburn Valley.
Mr Coombes said there was a push to force the price lower, but there had been little interest from producers to sell for less than $200/t on-farm, with most of the state’s barley between $30/t and $40/t in freight to the Goulburn Valley.
He said dairy farmers would continue to target high protein and high energy grain, rather than looking at downgraded wheat which is of a lesser feed value.
Farmers with low-grade feed barley in the Wimmera are looking to grade out the screenings and deliver into the Malt No Retention paygrades, which are trading at a $30/t discount to malt prices, but around $100 above their on-farm Feed 1 barley price and significantly above paygrades below that.
Mixed farmers are storing the screenings, which still largely have good feed potential, for use for their own livestock, rather than sell at well below the cost of production.
The supply and demand sheet among the southern domestic market will be interesting, with Mr Coombes saying there was far less hay about than last year, with most grain farmers seeing their crops through to harvest – which will mean the dynamics are different to last season.
Further north, farmers are attempting to salvage the best possible price for downgraded wheat and are unlikely to accept rock-bottom prices if there is still good feed value in the grain.
Emerald Group have given growers in northern New South Wales and southern Queensland a new high protein wheat grade to accommodate for quality downgrades due to recent rain.
The new grade, AH9, opens at $270/t FOB and is a high protein grade with low falling numbers and is designed to give growers one more grade before dumping into the feed paygrade.
It is trading at $15/t above Emerald’s feed wheat estimates of $255/t FOB, which has come back in line with the pressure on global feed wheat values.
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