Grain and hay report

This report has been commissioned by Dairy Australia to provide an independent and timely assessment of grain and hay markets in each dairying region. It should be remembered that actual prices may vary for quality or other reasons. All prices are quoted are exclusive of GST.

NATIONAL BACKGROUND COMMENTS: Week ending 10th May 2012. Please note that direct links to reports on each dairy region immediately follow this national summary for grain and hay.

International & National Summary - Grain:

• Tight global old crop stocks (particularly in the USA) continue to prop up spot futures, while idle growing conditions erode new crop gains. But on price dips foreign buyers have emerged from the shadows to support futures sinking lower.
• At last the seasonal break occurred across most of the WA grain growing regions, with showers and a few thunderstorms over the weekend. The rain was beneficial in lifting topsoil moisture as well as improving planting.
• The event was the first sufficiently widespread precipitation the area has seen in months. More widespread planting occurred last week in anticipation of the weekend's rain, with the earlier sown crops now jumping out of the ground.
• No joy for follow up rain for the next two weeks across the country, with regions needing additional follow up rain after largely missing out on the weekends event
• However planting continues in earnest across country, with faba beans and canola the first crops in. Still early days for wheat, with low topsoil moisture levels limiting the pace of plantings in regions.
• In the south most canola would have been planted, with cereals commencing. Depends on who you talk too, but for some regions in southern NSW it is still too wet, with air seeders chasing dry paddocks, whilst other parts of the south top soil is too dry limiting aggressive plantings.
• Even if it turns out to be an average growing season in Australia, high subsoil moisture in NSW/QLD should carry the crop through to the spring.
• Whilst strong old crop carry over will be a buffer for any production shortfalls. However the BoM alluding to a dry winter throws a cat amongst the pigeons, and you would tread cautiously in hedging too much volume (in cereals) so far out.
• Domestic Australian old crop values have shown price resilience in the face of lower international futures, largely in part to falling Aussie Dollar. The dollar is at a seven-month low after slumping 6.54c since March; this has made prices more competitive on the world market.
• This hasn't yet been reflected in delivered dairy prices, with grain prices steady throughout Victoria, WA and Tasmania.
• Although there is the odd paddock still to be finished in main southern regions, the CQ sorghum harvest is still some week's way. There are a few early crops being sprayed out, with a hope of getting them off and double cropped back into chickpeas.
• Track sorghum prices have finally stabilised, however at the lowest price of the trading range. As you would expect current prices are not attracting too much grower enthusiasm, with current May prices the lowest for this time of year since 2005.
• New crop grower selling remains absent with some grower's fortunate to be under rain last week sufficient to start planting in the north.
• But some forward selling may surface once the crop is planted and starts to emerge.

National Summary - Hay:

• A fairly stable week for hay prices throughout the country. However the high demand hotspots of south west Victoria and south east South Australia still continue to need hay as conditions cool and pasture growth slows.
• A large amount of 2010 hay is moving into these regions and both sellers and buyers need to pay particular attention to the suitability hay they are trading for transporting. Hay stored outside will have a reasonable amount of degradation on the outside 3-8 inches which can decrease the stability of a load significantly.
• Sowing is underway for vetch and oaten hay varieties across southern Australia. With higher hay prices compared to this time last year there is more interest in sowing crops suited to hay production.
• Oaten hay varieties are extremely popular with seed becoming increasingly difficult to source. A strong export market for hay is underpinning increased acreages sown to oats.
• There is also renewed interest in vetch, with record canola plantings last year vetch is popular as a nitrogen fixing crop before sowing into cereals the following year.
• As autumn calving approaches there is increased enquiry for cereal hay, however supply is limited.
• The strong export demand for oaten hay has left limited availability for the domestic market. There is however still some cereal hay available to the market in rolls, export processing plants only have the capacity to process large square bales. The obvious downside is the increased freight cost per tonne when buying hay in rolls.
• The nature of the hay market had turned 180 degrees. This time last year, with the exception of WA, supply far exceeded demand. Now the market has a large appetite for hay and there is great pressure on supply of both legume and cereal varieties.
• The supply pressure in NSW for lucerne hay may be felt for some time as the flooded lucerne stands will not be able to be sowed back to lucerne until 2013. The flooded stand will need a break crop of cereal to break the weed threat that would choke young lucerne seedlings, were they sown now.
• Vetch is a great feed source equivalent to lucerne and this may be an option for many to grow as an opportunity crop.
• With large acreages of lucerne suddenly taken out of production, supply will be affected. Many growers affected are suggesting they still had two cuts to harvest for hay production.
• In these regions the price difference is widening between horse quality hay and cow quality. There is a severe dent in the crop that can produce horse quality hay and very little is stored and demand is high. There are however, reasonable volumes of cow quality hay in storage with little demand. Many of the crops in NSW that still can produce a cut will be delayed and even if curing conditions are favourable the maturity of the plant will most likely preclude it of being of chaff quality.
• Prices for hay have been increasing in some areas of Qld and NSW on the back of demand from the horse industry
• Wet weather during harvest in Western Australia has put pressure on the market in eastern states. Approximately 40% of hay exported from Australia normally comes from WA however poor quality will greatly restrict exports this year. This puts increased pressure on export plants in South Australia, Victoria and New South Wales to be able to source and process hay and straw to compensate.
• Vetch and cereal hay is in limited supply in the eastern states. The upside is that hay quality across the eastern states is very good.
• Vetch, which is popular in south eastern states dairies but reduced sowings in the Mallee and Wimmera regions of Victoria and a large percentage of vetch ploughed in for green manuring have limited the supply.
• Given the reduced volume of hay conserved, the peak demand period of winter this year still provides some uncertainty for hay price stability.

Notes: Prices are estimates based on delivery to dairy farms with allowance for freight, storage, and marketing costs, but exclusive of GST. Wheat prices are for the relevant stockfeed wheat available in a region (ASW, AGP, SFW1 or FED1) and F1 for barley.

Notes: Hay prices are delivered, GST exclusive based on shedded hay without weather damage, of good quality and colour. It should be noted there is a wide variation in quality for hay, so prices are indicative for a mid-range product.