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 8th February, 2019.
The next update will be on Friday 22nd February, 2019. Direct links to reports on each dairy region immediately follow this international and national summary for grain.
Driving Prices Up
With the US Government now back open (at least for now), the USDA are again beginning to release information which offshore grain and oilseed markets are eager to see.
- One of the more significant data dumps will come on Friday night (February 8) Aussie time, as the USDA releases data including its monthly World Supply and Demand Estimates Repot (WASDE), US Quarterly Stocks Report and US Winter Wheat Plantings Report.
- Broadly speaking the anticipation of these reports has created a mild level of support in offshore markets, including CBOT wheat and corn markets.
Driving Prices Down
In Europe and the Black Sea winter wheat crops have benefited from recent snow and rainfall. As winter wheat crops currently covered by snow in the US and the EU come out of dormancy throughout this month offshore markets will get a better understanding of how they are shaping up.
- The recent announcement that the US Fed would take a more cautious approach to raising interest rates has pushed the US$ lower and as a result the A$/US$ exchange rate has moved higher. In turn, this has placed pressure on offshore values in A$ terms.
Global Trade News
With the end of the cease fire period in the US/China trade war fast approaching (March 1), progress of trade negotiations between these two countries continues to capture the attention of offshore grain and oilseed markets.
- Over the past week it has been announced that China will be looking to purchase 5 million tonnes of US soybeans in the coming months (not all at once though). The possibility of Chinese purchases of US corn and wheat is also now on the cards.
- Since this time purchases of .6 million tonnes and 2.6 million tonnes of US soybeans by China has been announced.
- At present a view that both countries will look to work towards some sort of deal (before March 1) is gaining traction. This is for reasons including that a continuation of the trade war would continue to hurt the economies of both countries.
- However, at time of writing there were no plans for the Presidents of both these countries to meet before the March 1 deadline.
- Whilst prices still remain at near record highs local grain markets do continue to drift sideways to lower, with a lack of market liquidity being a key driver of this trend.
- Broadly speaking, given prices are still at near record highs, the demand side is not looking to buy too far ahead, hence this lack of liquidity.
- While the preference of domestic buyers to make purchases on a hand to mouth basis is highly likely to see liquidity come in and out of the market in the coming months, the fundamentals which have gotten the market to where it is currently sitting (i.e. feed grain shortage on the East Coast and the movement of grain from WA to the East Coast) do not look like changing.
- At earlier times this season it had been hoped that a strong sorghum crop would be able to relieve some of the tightness on northern grain markets. However, a recent lack of rainfall may well mean a year on year decline in sorghum production.
Price change in table below reflects moves since previous report (1st February, 2019)