The Australia harvest is proving to be troublesome for both farmers and marketers, with a combination of bad weather, a sluggish international market and uncertainty combining to mean the most stop-start harvest on record.
Bad weather has seen the typically earlier northern NSW and WA crops still to be harvested.
With their later-maturing crops, many Victorian and South Australian farmers are waiting on their crops to harvest, meaning it is extremely tough to get a handle on the supply and demand situation.
Complicating matters is the heavy November rain through northern NSW and parts of WA.
It is certain to create some downgrading of grain – the question now is how much.
Estimates vary – but in parts of NSW where over 200mm has fallen for the month, it is likely there will be significant damage.
Most within the industry are predicting spreads between feed and human consumption grains will continue to rise.
At present, the ABB spread between feed and malt barley is $135 in Victoria and $130 in NSW. The ABB wheat spread is about $25, but expected to widen.
One trend among growers has been to sell milling wheat or malt barley, but to hang onto their feed grain in the hope of a price rise once the market settles.
Many growers with F2 or lower graded barley have said that the prices being offered do not cover the cost of production, given this year’s high fertiliser prices, and have said they will hang onto their grain.
The international market has been slow, with most end-users not looking to over commit in case the price continues to fall.
Added to that, the cost of credit has meant the cash market, especially for feed grain has been very slow, with only one or two participants offering prices at many upcountry sites.
These prices have often been well below parity in comparison to international futures and farmers have largely decided to warehouse or store on-farm rather than take what is perceived as a harvest dip in prices.
Sales in commodities, where the pricing has been more buoyant, such as canola, have been brisker – with many farmers choosing to sell canola for cash to generate cash flow.
The uncertainty means that no-one is quite sure of what trend the market will take.
Speaking after the first lot of rain through northern NSW, Special One chief executive Ed Colless said it would be a low-key market until headers got back in the paddock.
“It’s going to be a holding pattern until the headers really get going again and we can see just how much damage there has been.”
Mr Colless said he thought there would be opportunities for growers who produced quality grain for human consumption.
“There are a few buyers about who were waiting for the big run of NSW grain they hoped was coming – now that it is likely that there will be a lot of downgrading going on, it might mean they have to search a bit harder and that there’s some regional shortages of milling wheat.”
ABB Grain field agent Rebecca Scott was less bullish about the prospects of the feed market.
Internationally, there is a lot of feed grain about, and discount exporters such as Russia and the Ukraine have taken advantage of cheap freight rates to export to areas normally not competitive due to freight, such as eastern Asia.
Domestically, Ms Scott said there was likely to be plenty of feed grain about, especially with the prospects of the summer crop looking good, following the November rain in northern NSW and Queensland.
“You look at the world supply and demand and you look at domestic production and you’d think there’s going to be continuing pressure on feed grain.”
She said the scope was there for a further widening of the spreads given pricing earlier in the month was factoring in the production of high grade grain now likely only to be feed.
Farmers are reacting to the news by storing unprecedented levels of grain on-farm.
Coonamble farmer Ross Chandler said he was looking to store all the feed grain he produced on-farm and market it after harvest.
He hoped to find a home for it in the domestic market.
A lot of domestic action will take place through the south of the country, with key end-user areas in the Riverina in NSW and the Goulburn Valley in Victoria having poor years and having to buy in large amounts of grain.
Mr Colless said much of the feed grain in north-west NSW would find a home in Victoria, even allowing for the freight differential.
“A fair bit of grain from up here ends up down in Victoria.”