All about the national and international grain market and how grain contributes to farm inputs and costs.
International and national summary
National background comments: report for the week ending 15th May, 2020.
The next update will be on Friday 29th May, 2020. Direct links to reports on each dairy region immediately follow this international and national summary for grain.
Driving Prices Up
Another week of mainly downward pressure on offshore grain markets. At different times in the week, however, both CBOT wheat and corn futures looked like they were trying to find a floor, after having lost 10% and 20% respectively, since the start of the year.
- With more rain needed in winter wheat growing areas, including Russia, the Ukraine and the US Southern Plains, lingering concerns about the development of wheat crops in these areas have helped CBOT wheat futures resist a portion of the weakness seen in neighbouring corn and soybean markets.
Driving Prices Down
This week saw the release of this month’s USDA World Agricultural Supply and Demand Estimates (WASDE) report. This periodical report is routinely awaited by global commodity markets, with the May instalment always drawing special attention, by virtue of being the first estimates of new season estimates (in this instance the 2020/21 marketing year/season).
- World wheat stocks (for 2020/21) came in above market expectations, at a level which would be a new record (if realised). Production increases in Australia, Russia, Kazakhstan, Canada and Argentina were the key drivers of this move.
- This continues a trend which has been seen for several years, in which increases in the global supply side have kept the pressure on world prices.
- World and US corn end stocks were also tipped to grow this coming season.
- Following the release of this report, heavy selling pressures have been seen in CBOT markets, providing a consensus that these numbers have been seen as uneventful.
Global Trade News
This week it was announced that China’s Ministry of Commerce (MOFCOM) is reportedly considering placing tariffs on barley imports from Australia, as a result of the ongoing anti-dumping investigations. Please see below for further information.
- The news that China may be looking to place import tariffs on Australian barley; in response to previous anti-dumping allegations, has sent shockwaves though the local grains industry.
- China has also announced that they plan to suspend beef imports from an Australian meatworks (with the government since indicating that this ban was mainly due to an administrative issue).
- China first announced that they would be launching enquiry into Australia “dumping” barley into the Chinese market in November 2018.
- The WTO (World Trade Organisation) defines dumping as when exports are sold “at a price that is lower than the exporting country’s domestic market and/or lower than production costs which results in the damaging of the importing country’s domestic production of the commodity/good”.
- Under WTO rules dumping “is not prohibited unless it causes or threatens to cause material injury to a domestic industry in the importing country”.
- Since the initial announcement extensions to this investigation have been made, with the maximum possible extension under WTO rules is set to end later this month.
- It is believed that the value of tariffs being looked at could potentially be as large as 73.6%, which would very much price Australian feed barley out of the Chinese market.
- In recent years China has become the most important export market for Australian barley and, in order to find business in other export markets, Australian prices would probably need to come back significantly from where they currently are.
- The immediate market response has been a sharp pullback in the buy side, putting an effective freeze on barley markets.
- Publicly posted prices have declined by as much as $75/t (circa 25%), in Western Australia.
- With the planting of this seasons winter crop well underway, the ability of the supply side (grain growers) to change up planting programs in response to this news is limited (at least for this year).
- With these tariffs/or threat thereof in place, an increase in locally available supplies and significant downward pressure on prices seems likely for the coming year.
Price change in table below reflects moves since previous report (8th May, 2020)