Price boom for feed grain

24 Apr, 2015 02:00 AM
Comments
3
 
Australian sorghum is one of the dearest commodities in the world at present

KEY POINTS:

  • Sorghum prices attractive
  • Export premiums likely to dry up as northern hemisphere new crop hits market
  • Old crop barley tightly held

  • AUSTRALIAN feed grain producers are enjoying a stunning run of prices, generated almost exclusively by Chinese demand as the Asian nation continues to shun US corn.

    Sorghum and feed barley prices are both at historic high levels, with feed barley in the south-east priced above wheat and sorghum in the Brisbane port zone up to $25 a tonne above milling wheat.

    Traditionally, wheat - which has better nutritional properties than either barley or sorghum - trades at a premium to both.

    Bids for feed barley, delivered Brisbane, are up to $294/t while sorghum, delivered Newcastle, is $317/t.

    The news is not so rosy for sorghum exporters looking to push sorghum into China as a feedstock. The impasse over export permits, due to biosecurity concerns, remains.

    Furthermore, the trade believes the hefty premium for feed grain from China may be on the verge of ending as that nations starts to look towards new northern hemisphere crops.

    But at present the market continues to boom, with sorghum values rallying up to $13/t in the past week.

    Time to take advantage

    Hannah Janson, ProFarmer senior manager, said she believed farmers should take advantage of the prices on offer at present.

    “We feel there is value in engaging the market at current values, with bids rewarding immediate delivery and discounts for later delivery, with US new crop sorghum coming online from June.

    “If you are not yet harvesting but are confident of yields, then this could involve forward contracting.”

    Matt Pattison, trading manager with PentAg Nidera, based in Toowoomba, said south-east Queensland’s sorghum harvest would again gear up by the weekend after light rain this week.

    He said the trade was wrestling with the import permit situation.

    “It’s certainly causing issues, there are ships currently berthed incurring demurrage costs because the permits are not organised.

    “The issue with Johnson grass as a biosecurity concern to China is significant as I don’t think many traders could export a bulk shipment and say they had no Johnson grass in it.”

    He agreed with Ms Janson there was more downside than upside in the Australian market at present.

    “It feels like there is only fresh air holding up Aussie sorghum at present, you look at rival origins, such as the US, and they are belting us on price.

    “Australian sorghum is one of the dearest commodities in the world at present.”

    Barley values still high

    Further south, GeoCommodities managing director Brad Knight, based in Bendigo, Victoria, said old crop barley values remained high, but not much grain was moving.

    “The focus is more on the domestic market, rather than export,” he said.

    “There’s a certain amount of inelastic demand for barley, it’s the preferred grain for graziers and many dairy farmers.

    “We’re seeing more feeders become comfortable with wheat, but barley is still the preference in many cases.”

    Mr Knight said while it was unlikely there was much feed barley left in the bulk system, there were still stocks in on-farm storage.

    “I would say now if people haven’t sold already, given the good prices on offer this year, they will either be ensuring feed for their own livestock or perhaps speculating on a drought premium given there hasn’t been a break in much of Victoria and South Australia yet.”

    Ms Janson agreed there had not been much movement within the bulk system in barley.

    “The UAE is currently putting in a small tender for Aussie barley, it will be interesting to see what that flushes out in terms of both what the trade and growers have unsold.”

    Lock in spread anomaly

    Ms Janson said while it was early to be thinking of new crop, there could potentially be opportunities to lock in the current spread anomaly between barley and wheat.

    She said farmers could not factor in current opportunities lasting.

    “Chinese feed buyers certainly have an appetite for barley and sorghum at present as they are less regulated by the Chinese government than corn imports, but that can easily change.”

    She also said in terms of barley, the European Union would emerge as a big competitor.

    “France is a big barley producer, while the Black Sea is another region that could compete.”

    Both Ms Janson and Mr Pattison said the Chinese story was virtually single-handedly holding up Aussie feed grain values.

    “In barley, we’ve been priced out of traditional Middle Eastern markets all year, it has all been China,” Ms Janson said.

    “China is worth $40-80/t to Australian sorghum values at present and $40-50/t in feed barley,” Mr Pattison said.

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    FarmOnline
    Gregor Heard

    Gregor Heard

    is the national grains writer for Fairfax Agricultural Media
    Date: Newest first | Oldest first

    READER COMMENTS

    Pete Rothwell
    24/04/2015 7:45:34 AM

    I get so sick of hearing that things are so wonderful because we have "record prices" or "prices are at historic levels". In an economy with in built inflation prices need to be at record levels to just stay the same. I never hear that mars bars are at record prices!!
    Jed
    24/04/2015 8:55:37 AM

    Well written Pete. If the buyers want continued supply we have to pay our bills and then try to encourage the next generation of farmers to stay or come home! Global food security is not going to be protected by the big corporates because when things get tough the shareholders return is the only focus and they will bail. Family farmers will only survive to feed the world if we get paid a fair price from the merchants and that is a dream I once had.
    Bushfire Blonde
    24/04/2015 11:44:19 AM

    Well written from me as well Pete, producers are getting record costs just about all of the time, even when producers are not getting record prices. It is at last becoming recognized that Australia is one of the dearest countries on the planet to live or to operate a business. You only have to listen to the European back packers - they cannot believe how dear things are in Australia.

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