A bearish market sentiment can at times be self-fulfilling.
Buyers remain cautious and patient to purchase grain because prices are declining, and they may be able to buy grain at a lower price.
Growers can see prices falling, require cashflow, and sell into bid prices that don't have a lot of volume behind them, which keeps buyers comfortable and patient.
This partly describes the current grain market in Australia.
Buyers of Australian grain, both offshore and domestically are taking a cautious approach.
What can growers control in this market?
Northern hemisphere crops will soon be entering the critical spring period meaning weather forecasts and crop conditions will influence the direction of the market in coming months.
The United States Department of Agriculture (USDA) rated the US winter wheat crop at 50 per cent in good-to-excellent condition in its last crop condition report at the end of November.
This compares with the five-year average rating reported by Profarmer Australia of 46pc good-to-excellent at the same time of year, which is just before it goes dormant under snow.
The USDA will begin to provide its weekly crop condition reports again when the winter wheat crop comes out of dormancy at the beginning of April.
The world is not abundant with wheat, or grain generally for that matter, and will need reasonable crops this year to satisfy demand.
The last USDA World Agricultural Supply and Demand report (WASDE) indicated world wheat stocks-to-use is expected to reduce year-on-year.
World corn stocks-to-use on the other hand is expected to increase which is largely due to an anticipated significant increase in US corn stocks-to-use.
However, this is all based around forecasts of record US corn yields.
The market appears to be banking on this, however most of the planting and weather to secure yields this year is still ahead of us and so the potential for hiccups to production remains.
Northern hemisphere spring crops are still to be planted and include higher protein wheats, corn, barley, canola, soybeans and other smaller crops like oats and pulses.
In Australia, more growers are becoming comfortable offering their grain at a price they feel is fair value and it's creating value rather than chasing the market lower.
Thirty buyers purchased 22 grades of wheat, barley, canola, lentils, sorghum and oats in 12 port zones across Australia through Clear Grain Exchange last week.
Many growers are also planning their sales and cashflow through the year with many opting to offer grain for sale in future delivery months such as July 2024 which can line-up with buyer demand.
For more information or to see what values are trading contact Clear Grain Exchange on 1800 000 410 or support@cgx.com.au
