By Nick Robertson - AWB
For most farmers across the east coast, Christmas came early this year. The build up to this year’s crop was highly anticipated and so far, it hasn’t disappointed. Grain continues to fly into bulk handlers and on-farm storage at rapid rates with growers hoping to be finished harvest by Christmas. While yields so far have come in better than expected, commodity pricing is beginning to show some cracks. With harvest not yet over and grower selling still strong, the cracks might get longer and wider.
As the east coast harvest continued to hit the bins in December, ABARE decided to drop a mammoth 32mmt wheat crop estimate on the Australian market. It was fair to say this number was a surprise to the local market with news travelling loud and strong through the social media wires overseas. Since the estimate was released, we have seen a significant drop in Chicago futures which is partly due to both ABARE’s increased wheat number and China slowing its purchasing of US agricultural products. Prices coming into this harvest had been strong and that was with an approximate 29mmt Australian wheat crop however, rumours of China lack of interest in Aussie wheat retraced the market quickly. Chatter of Russian dryness going into their dormancy period was the talk of the market but lately that has gone quiet. When Russian wheat comes out of the winter dormancy, that will more than likely define our pricing going forward. As the Black Sea is the biggest wheat exporter in the world, they will be our main competition moving forward and define pricing as we move into 2021.
The challenge for farmers and industry alike for the coming months is how we physically shift the vast amounts of grain that have been produced across the cropping belt. There is ample export demand into traditional and non-traditional destinations to allow us to do this, it is time however that is working against us. With a sizeable inverse in the northern hemisphere markets, most notably the Black Sea region, the challenge is to price these commodities and get them to market prior to the new crop supply in mid next year. Export supply chains have been and will continue to be stretched during this period.
The question for growers should be how we approach selling this massive crop moving forward. Harvest pressure has been building on wheat and barley for the last couple of weeks and both are feeling the heat. Although both have fallen considerably, the gross margin is still stacking up for growers to sell. This may mean there could be more pain to come until the new year. The good news is that we are already competitive in global markets for both wheat and barley, the bad news is that it doesn’t mean the market won’t fall further. With a little over two weeks from Christmas, let’s hope there are only bullish pricing stories to come.