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 10th August, 2018
The next update will be on Friday 17th August, 2018. Direct links to reports on each dairy region immediately follow this international and national summary for grain.
Driving Prices Up
- In offshore markets, concerns about production in a number of major exporters such as Russia, France, the US and Australia continue to push prices higher.
- CBOT wheat futures reached a three year high over the past week and speculative buyer appetite has been one driver that has supported this market.
- The monthly World Supply and Demand Estimates Report (WASDE) is due to come out Friday night (10/08/18) Aussie time.
- In the lead up to this report expectations that it would show a further contraction in world wheat stocks pushed offshore wheat values higher.
- With global corn stocks expected to tighten significantly the market will be keeping one eye on the USDA's updated estimate of US corn yields and production.
- Any further decline in both global and US corn production and exports has the ability to create further upward price pressure in global feed grain markets.
Driving Prices Down
- In the lead up to a USDA WASDE report speculators in offshore grain markets are often reluctant to take too strong a view on the market, in case the numbers in the report show too much variation from market expectations.
- Although there have been no fresh and unexpected developments in the US/China trade front over the past week, US/China trade tensions do continue to cast a shadow over both CBOT soybean futures and offshore grain and oilseed markets more broadly.
Global Trade News
- Up until recently Egypt has been the world's largest importer of wheat with these imports managed through the government agency knows as GASC (General Authority for Supply Commodities).
- As a result the values at which business into Egypt has been done has become a method of price discovery in global grain markets.
- In earlier years French, US, Canadian and Australian wheat were the main players in this market.
- However, in recent years as Black Sea countries (including Russia and the Ukraine) have stepped up production exports these countries have been able to price themselves into this market and are now the major players in this market.
- Despite expected year on year production/export declines the latest GSAC tender result still showed wheat of Black Sea origin winning this business.
- However current International Grain Council markets data indicates that (on a FOB basis, i.e. excluding freights costs) Black Sea export wheat values are up around 20-25% year on year.
- The fact that exports from these origins have gone up in value year on year does support the idea of higher global feed (and milling) grain values.
- However, while there may be less Black Sea wheat coming into export markets this season the values at which it is being exported is still likely to have an impact on global wheat (and other grain) markets more broadly.
- Local markets remain weather markets and below average yields and production in NSW and Queensland are all but a foregone conclusion.
- Given this local markets continue to price in the fact that grain will again have to be brought from outside the traditional drawing arc during the coming year or so.
- The federal government has recently announced the (re)introduction of freight subsidies to assist livestock producers who are having to source grain from far further south and west than they typically would have to.
- Over the past week there has been considerable firmness in local grain markets. While offshore markets have been one driver of this trend there have been some suggestions that some sellers have seen this as an indication that some buyers may be willing to pay more now this subsidy is at their disposal (i.e. pass on at least some of the fright subsidy to sellers).
- However, Aussie grain markets are still sellers' markets so outside of the impact of any such subsidies seller price expectations/targets do remain a key driver of local markets.
Price change in table below reflects moves since previous report (3 July 2018)