No one assumes the Australian Crop is made yet - AWB
- By: "Farm Tender" News
- Cattle News
- Jul 17, 2019
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By Angus Groves - AWB.
n Australia we are tracking sideways in terms of pricing. The larger the crop gets in the south and west of the country, the more comfortable the market becomes with the supply and demand picture for harvest. By all means, no one assumes the Australian crop is made yet, we only have to cast our minds back to the hot and dry conditions of September last year. But certainly, with conditions looking positive in Victoria, and South and Western Australia, the supply side is having the most influence at the moment. Adding fuel to the fire for the supply bulls is the fact that the market is now comfortable moving grain from South and Western Australia to the eastern and northern ports. This will continue into the next marketing year as we see a surplus of grain in the southern states and a deficit in the New South Wales and Queensland zones where the majority of the feed demand sits.
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The canola picture is similar to the cereals in some respects, as there looks like there will be an exportable surplus from all states except New South Wales. And with the market comfortable moving canola from west to east, there will be a cap in the market based on wherever the cheapest willing seller exists. For example, if Western Australian farmers are happy to sell their canola for $550/mt, and the transport costs to put the canola on a boat and ship this around to Newcastle are $80-90/mt, then the cap in the market is set at $630-640/mt delivered Newcastle.
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This relatively simple spread calculation is applicable for all grains and indicates that grain will continue to flow south to north, as in southern states is where the bulk of the surplus grain lies. Given we are in July and there will be no further planting from now until harvest, it is highly likely that trade flows will continue this way right through next year. Unfortunately, it appears as though 2019/20 is going to be similar to last year and it will be 18 months before we get the opportunity to fill the pipeline on the east coast.
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