Australia: Tight hay stocks fuel jump in local wheat

The market is abuzz with talk of unseasonally warm temperatures, exactly what crops low on moisture do not want, coming to south-eastern Australia next week.

It may be enough to encourage some growers to cut some of the cereal area for hay, after a brutally dry first half to the year in South Australia’s South East, Victoria’s Western District, and parts of southern New South Wales, largely cleaned out on-farm stocks.

If crops looking at a below-average yield already get hit with frost, or flag in the forecast warmer weather, they are likely to be dropped for hay, meaning area harvested for grain will be lower than initially expected.

On the export front, some barley cargoes need filling, and the low Australian dollar is helping to make containerised wheat and barley competitive into Asian markets.

Table 1: Indicative prices in Australian dollars per tonne.

New-crop wheat and barley values are unchanged from last week, but wheat for prompt delivery has jumped by around $15/t as carry-out tightens.

“There’s certainly some inquiry for…the last half of August and first-half September, which makes sense if we’re going to see a bit of new-crop coming off in October,” one trader said.

“We’re getting lots of small inquiries, and we haven’t got the carryout like we did last year; our stocks are going to be wound right back.”

Another trade source said prompt wheat and barley offers were coming through brokers.

“I’m seeing the offer side trying to find bids.”

Wheat and barley crops in Queensland and northern and central NSW are generally in excellent condition, although frost may have trimmed yield prospects in some pockets, where a handful of growers are considering cutting crops for hay.

This week has also seen more good rain in northern NSW, with falls of 20-40mm in some districts to top up the moisture profile for the last weeks of winter.

Cottonseed at around $510/t delivered Downs is having trouble competing with canola meal, which is offered in new-crop slots at $560/t, and seed has therefore been cut back in some feedlot rations.

Prices in the southern market have jumped in the past week as concerns build around the crop’s precarious situation.

After some frosty, dry and windy weather, cropping regions in Australia’s south-east are forecast to get maximum temperatures of up to 25 degrees Celsius.

In parts of Vic, SA and southern NSW where subsoil moisture reserves are limited, this is of concern.

Wilken Group trading manager Andrew Kelso said the market has focused on local factors rather than the bearish global sentiment.

“The market’s been ignoring…what’s happening here in certain parts of south-eastern Australia,” Mr Kelso said.

“People are saying spring will arrive early, and that’s making people nervous.”

“No-one’s selling new crop at the moment.”

Mr Kelso said some grazier demand for grain to get livestock through winter remained in western Victoria, and this could continue amid the outlook for a thin hay season.

“There’s not the bulk in pastures, vetch and cereals because they haven’t the rain, and the weather’s been cold.”

Tags: weather, wheat, yield, Market, markets, sorghum, cereal, Australia, barley