Tuesday, February 14th, 2012 - Bankwest
Harvest has been slow to gain momentum this year, especially in WA where unseasonal late rains have seen growers keep their crop in ground well into January.

As a result, grain quality has been reduced in the west, echoing last year’s conditions on the east coast.

Nonetheless, Grain production in WA is high, with CBH expecting almost 15 million tonnes of receivals, the highest on record.

The bad news is that grain prices have fallen well below budgeted estimates of around $270/t to a current $230/t..

This month’s USDA report was bearish for all grains, with wheat stock-to-use levels forecast to match the record highs of 1999/00 (31%).

The US is also projected to have increased its productive winter wheat area. Crop sale rates have generally been slow so far, with 35% of grain still unallocated.

Canola has been sold early at prices close to budget (90% of the 85% allocated crop has been sold to cash). Just over 88% of the barley crop has been allocated in total with a touch above 50% sold for cash and the balance being pooled.

At 41% wheat is by far the largest unallocated crop. The variety mix is evenly spread between all grades, so there appears to be no consistent approach to sales. Of the grain sold, around 50% has been pooled, a significant increase on last year.

Growers holding out for a price hike could prosper... if they set a realistic target price. But opportunity may be limited; our view is that any spike in value is unlikely to be sustained.

The USDA WASDE report released last week maintained the gloomy trend for wheat. Global wheat stocks continue to climb, elevating stock-to-use ratios to a level that is now comparable with the record highs of 1999/2000. Concerns surrounding South American weather and winterkill in the US could see prices bounce on bad news, providing a potential opportunity for growers who are holding out for a spike in prices.

Feed Barley prices have moved up relative to APW wheat with the discount now at its lowest point of the year at less than $10/t (compared with a norm of around $40/t). An excess of feed wheat from this year (and a carry over from last) has resulted in acquirers bidding for barley in order to fill their export commitments.

CANOLACanola stocks are at comfortable levels, while globally oilseeds are sitting at 24% stock-to-use. Consequently, there is no major pressure on prices right now. South American soybean crops are coming into harvest soon and are driving prices at the moment despite concerns over dry conditions. With La Nina continuing to decline, drought concerns are slowly reducing but conditions are likely to remain volatile over the next couple of months.

Following the Christmas slowdown livestock supplies are steadily increasing as processor demand grows. Cattle prices have fallen over the last four weeks as dry conditions in northern NSW and Queensland encourage farmers to offload stock. Restocker demand is also on the way down as weaners come into the market. Favourable growing conditions through spring 2011 have resulted in good supply for quality lamb, keeping prices subdued.

WOOLDemand concerns in recession-prone Europe are keeping wool prices static. There has been very little movement over the last few months with the EMI currently sitting at 1190c/kg.

Contact Profile

Peter Rowe

P: (08) 9420 5179
W: www.bankwestagri.com.au


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