Global factors to have big impact

Global factors to have big impact

Grains
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WA grain prices will be impacted by global factors more so than in recent years.

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Rabobank agricultural analyst Wes Lefroy at the Liebe Group Crop Updates in Dalwallinu last Wednesday.

Rabobank agricultural analyst Wes Lefroy at the Liebe Group Crop Updates in Dalwallinu last Wednesday.

IN 2020, global factors will have more of an impact on grain prices in Western Australian than they have over the past few years, due to a variety of factors including, but not limited to Covid-19.

The global grains outlook was provided by Rabobank agricultural analyst Wes Lefroy at the Liebe Group Crop Updates in Dalwallinu recently.

In recent years, local dynamics have supported higher grain prices in WA as there has been a large quantity of grain moving from WA to the east coast.

The shortage in supply and extra demand from the east coast, coupled with tight local balance sheets in Australia, have all played a part in supporting high local prices for WA grain.

However, this year, if the weather forecast from the Bureau of Meteorology (BoM) was to play out as predicted, it is expected global factors will become more influential in pricing for this season.

Mr Lefroy said from February 2019 to February 2020, comparing those two months, there has been a significant improvement in rainfall and an increase in soil moisture.

"The three-month outlook from BoM is also positive, so given conditions are more supportive than this time last year, we think there is going to be a much larger export availability," Mr Lefroy said.

"As a result, global factors will be more influential on grain prices in WA than they have been in the last couple of years and we expect grain markets will be more exposed to global factors in the short-term."

The state of the global seas are a lot rougher than the last time WA was really involved, particularly when it comes to trade wars between China and America, as well as the ever-evolving coronavirus crisis.

Mr Lefroy said one of the biggest issues was going to be volatility in pricing due to the uncertainty of the relationship between China and the United States.

"Secondarily, with the trade deal, we might see some Australia grain exports into China being substituted for US imports, so unfortunately China might turn away from Australia in favour of American grain," he said.

Due to Covid-19, global economic growth is expected to take a hit, with Rabobank predicting a drop from 2.9 per cent in 2019 to 1.6pc in 2020.

While China will be hit the hardest, with the expectation being Chinese growth will fall from 6.1pc to 2.4pc.

Mr Lefroy said as coronavirus reached the level of a global pandemic, the key thing to watch was the effect on local incomes around the world.

"If it does have a major effect on incomes, that will limit demand for grains and oilseeds globally which would have some downward pressure on pricing," he said.

However, the initial concern for Australia is the availability of inputs as coronavirus, from an agrichemical perspective, has happened at a really inconvenient time.

"The ag-chem supply chain was already under pressure due to a 44pc cut in production in China over the past two years," Mr Lefroy said.

"We also had a lot of summer rain across the country, which really increased the demand for summer sprays.

"Couple that with coronavirus which has caused some big disruptions in terms of logistics coming out of China and ag-chem supplies are looking a little lower than we'd like."

The full economic impacts of coronavirus have yet to be felt and exactly how it will affect WA grain prices is mostly unknown.

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