AUSTRALIAN barley producers concerned about a falling price for their commodity need to be equally worried about the possibility of a thumping US corn crop and its negative impact on world markets.
This was the view of Market Check head of strategy Nick Crundall who said much of the price downside of the Chinese tariffs had already been priced into the Australian market.
"We saw last week when the news of the preliminary decision from China kicked in that the market fell about $50 a tonne for both old and new crop barley," Mr Crundall said.
"Since then there has been somewhat of a rally, back up around $10-15/t off the lows which indicates there is demand at those values."
Mr Crundall said while the tariffs were getting the headlines at present a steadily falling US corn price also would have an influence on pricing of barley.
Last week the US Department of Agriculture put out an is estimating total U.S. corn production for 2020 to be a record at just shy of 435 million tonnes, which would be an increase of around 17 per cent from the weather impacted crop last year.
The news from the corn belt is favourable thus far with more crop planted at this stage than normal and good moisture levels in many areas.
It has led some commentators to suggest prices could drop below US$3 a bushel, which would be the lowest price in a decade
Mr Crundall said while he did not necessarily see prices falling that low, a good corn crop would loosen the world coarse grain balance sheet and would put downward pressure on prices.
And US corn producers are likely to stick with the crop instead of looking at other options in spite of needing to grow near record tonnages just to break even.
Nick Carracher, Lachstock Consulting chief executive, said in spite of the low prices on offer the government subsidy programs and insurance schemes in the US meant farmers would still put the crop in.
"The measures they have in place mean it is still worthwhile planting," Mr Carracher said.
However, he said there was good news for coarse grain producers in the way world markets had moved following the USDA report.
"Even with all this negative news thrown at it the market still finished up slightly, if you look beyond the headline news there are a couple of more positive things there.
"Americans are getting back in their cars and we have the lowest amount of active oil rigs in the US since record keeping of their activity began, 330 down from 500," Mr Carracher said.
"The energy supply being so tightly constricted may mean support for ethanol comes back quicker than we thought."
Aside from the US corn crop, both Mr Crundall and Mr Carracher said there were some issues with crops in Europe.
"It has been a funny season in France, firstly too wet now too dry, so people will be watching to see how those crops hold up," Mr Carracher said.
Gregor Heard
Gregor Heard is ACM's national grains industry reporter, based in Horsham, Victoria. He has a wealth of knowledge surrounding the cropping sector through his 15 years in the role. Prior to that he was with the Fairfax network as a reporter with Stock & Land. Some of the major issues he has reported on during his time with the company include the deregulation of the export wheat market, the introduction of genetically modified crops and the fight to protect growers better from grain trader insolvencies. Still involved with the family farm he is passionate about rural Australia and its people and hopes to use his role to act as an advocate for those involved in the grain sector.
Gregor Heard is ACM's national grains industry reporter, based in Horsham, Victoria. He has a wealth of knowledge surrounding the cropping sector through his 15 years in the role. Prior to that he was with the Fairfax network as a reporter with Stock & Land. Some of the major issues he has reported on during his time with the company include the deregulation of the export wheat market, the introduction of genetically modified crops and the fight to protect growers better from grain trader insolvencies. Still involved with the family farm he is passionate about rural Australia and its people and hopes to use his role to act as an advocate for those involved in the grain sector.
