Is Australian grain too cheap?

Because many growers have been comfortable sellers at values bid to them.

Crops in many areas have been getting bigger during harvest and grain values have been in the top half of historical records (and often the top 30 per cent).

This has meant many growers are looking at healthy profits and happy to lock it in by selling.

Market analysts have rightly said that Australian grain needs to be priced competitively into global markets so that the large crop is exported.

But how cheap does it need to be?

Australian grain does not need to be $20-30 a tonne cheaper than its nearest competitor to win offshore demand.

This has been the case into many markets in recent months.

The reality is Australian growers have likely been the largest factor impacting global grain prices during harvest.

Many growers wanting to sell grain quickly have been hammering values lower as they are effectively paying grain buyers to carry their grain for them into months when it can be shipped, plus some.

Australia can only ship a certain amount of grain each month.

Hence if growers want to sell more than buyer demand, Australian values get discounted.

This flows on to pull the global price lower.

Many commentators note that Chicago Board of Trade wheat has weakened in the last month, which is partly attributable to lower Australian grain values.

Table 1 shows indicative wheat values as at the beginning of the week in United States dollar terms on a Free on Board (FoB) basis ex-WA versus our major competitor origins of Black Sea, Argentina and US Pacific North West.

The table then provides a comparison of values from those origins delivered to the major importers on a Cost and Freight (CnF) basis delivered major ports.

Note this analysis was done after the $15/t lift in grower bids at the end of last week.

Hence Aussie grain was even cheaper before this.

You can see WA wheat remains the most competitive into the major consumption areas of Asia and the Middle East for January 2021 delivery compared to our competitors.

When we do the comparison for barley (refer Table 2) it is a similar story.

Australian barley is by far the most competitive into the Middle East (a major barley consumer) and, not surprisingly, prices very competitively into China if there were no tariffs.

A slower selling pace from Australian growers will help to underpin prices. Australian growers should know that your behaviour is having a large impact on prices you're receiving at the farmgate.

Indicators are pointing towards a relatively strong demand profile for Australian grain.

Weighing on prices is how quickly growers sell their grain.

Make sure you have your grain on offer at the price you want so all buyers can see it and try to buy it.

There are plenty of buyers interested in buying your grain.

Twenty two buyers purchased grain through Clear Grain Exchange last week with more searching for grain on offer.

Offer at your price to all buyers and achieve your grain's full value.