International grain market stagnant

07 Jan, 2016 01:00 AM
There is ample world supply of wheat so the only thing we can hope for is weather

GROWERS are being encouraged to look for small local price spikes in the coming months as the international grain market remains stagnant.

The silver lining to unattractive selling prices will come as grain marketers require a top up amount of grain for their shipments.

However, an overall market shake up will be required for any significant spikes or overall rise in prices.

CBH marketing and trading general manager Jason Craig predicted a possible dip of the Australian dollar into the 60 cent region as the shake up the market needs.

"Most growers are looking at around the $300 mark based on APW and we haven't seen that for a while," Mr Craig said.

"We probably need to see some sort of fundamental change here over the next couple of weeks to attract growers and I think the only thing I see on the horizon would be a lower Aussie dollar.

"On a worldwide scale, everyone knows the cropping situation with our Australian production almost done and so the real surprise would be from something like a lower dollar to attract better pricing.

"If we saw it into the 60's it would be good for exports, particularly for those holding off from selling."

Mr Craig identified a well-stocked wheat situation on a global scale causing our usual buyers in Indonesia and China to hold back on any bulk or aggressive buying.

"Therefore you tend to see a market that has been a little bit stagnated with non-aggressive buying from consumers and non-aggressive selling from the grower," he said.

Mr Craig said the Chicago Board of Trade (CBOT) wheat prices had sat at the 400 cents a bushel mark for long enough that the market was discussing whether it had hit its bottom.

"People are asking is it getting towards its downside, but it's difficult to tell," he said.

"You would think that if we're not at the lowest, we're heading into the low because at this stage there's not a lot to happen, particularly in January where Chinese new year is early February.

"This will mean the major South East Asian and Asian markets will be reasonably slow up until that period (and it might lift after that)."

Grain Brokers Australia broker Mike Saunders said the market would have to pin its hopes on a major weather event to help Australian prices.

He said the Albany zone prices he was seeing with Feed barley at $230, canola at $550 and wheat at $270 had prompted many to hold onto grain into the new year.

"We all want the magical $300 for the wheat, that's the trigger point," he said.

"We're hoping for something to happen in the new year in spring when those areas in the Black Sea come out of their dormant period.

"There is ample world supply of wheat so the only thing we can hope for is weather."

Storms in the US have raised disease concerns in recent weeks, as have young Black Sea wheat crops going into their dormancy without frost resistance according to Mr Saunders.

However, the results of these and any future weather events in the northern hemisphere won't be seen and won't affect prices until their spring into March.

Mr Saunders said growers should be looking for small spikes in local prices as grain exporters look to fill their ships.

"The spikes won't be as drastic as in previous years where we saw people fighting over grain - the Long Term Agreements (LTAs) have meant that should be reduced significantly," he said.

Mr Saunders said the price certainty and savings exporters gained through the system approved for use in WA for the first time this season would rule out significant impacts.

"We'll only see a $5-$10 spike, whereas last year there were significant spikes when the marketers were chasing grain," he said.

"You need to figure out where your interest rates are (for stored grain) and whether it's worthwhile holding onto it because the longer you hold onto it the more you have to gain (in prices).

"I'm certainly a believer that we will see some spikes as shipping slots come up, but for a whole market move upwards we're looking for weather concerns in the Black Sea or US."

Emerald Grain general manager Dick McCagh said the hesitation by growers to not forward sell in such an uncertain season had led to many now being forced to sell to cover expenses.

"Growers are like everyone, they need cash flow for certain requirements so at the present there is a lot of grain unsold and they are trying to find the best price that they can for their grain," he said.

"People were worried about forward selling especially as it didn't rain from Newdegate field days onwards really.

"The positive is that we're into January and there's a lot of shipping on the go so people will need to top up cargoes so there could be price spikes but it won't be for every grade, it'll depend on the shipment."

Mr McCagh said it would be first in, best dressed for growers and selling would be in small amounts as exporters would have the bulk of their grain covered.

"For ones that want to take a long-term approach, there's a view that if there's weather issues in the northern hemisphere they may pick up some prices going forward, but really my advice is to say sell what you need to, keep ticking away at it and don't think you can do it all in one day," he said.

"It's not all bad as a lot of growers have sold canola, lupins and Malt barley at fairly good pricing levels and this has helped with cash flows.

"However it is a bit unusual to see growers holding so much wheat at this time of the year."

Mr McCagh said lacklustre Feed barley prices were a result of China limiting its purchase of stocks of feed grains.

He said this was forcing WA to compete into Middle Eastern destinations to sell its Feed barley and prices were forced downwards.



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