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Dairy Australia - Hay and Grain Prices

10 March 2014

Dairy Australia - Hay and Grain Prices - Week Ending 7 March 2014Dairy Australia - Hay and Grain Prices - Week Ending 7 March 2014

This report has been commissioned by Dairy Australia to provide an independent and timely assessment of grain and hay markets in each dairying region. It should be remembered that actual prices may vary for quality or other reasons. All prices quoted are exclusive of GST.
Dairy Australia - Market News

International & National Summary - Grain:

  • Grain news has been dominated this week by the civil unrest in Ukraine and pro Russian militia rolling into the Sevastopol airport in the Ukrainian peninsula state of Crimea. While the conflict does not impact global grain supply and demand fundamentals, it has the potential to significantly impact the movement of grain in the region. As a result the uncertainty surrounding the Ukraine situation has unfortunately seen global wheat prices jump significantly this week as traders look to gain exposure at current levels. CBOT wheat futures increased in value for the third consecutive week to finish up A$5/t from last week to close at A$258/t on Tuesday night. There are two likely outcomes from this unexpected crisis and its impact on grain values. If the matter is resolved quickly the risk premiums in the market will most likely recede and prices should return to reflecting the fundamentals suggesting lower prices. Alternatively if the crisis continues to escalate the Black Sea market may become restricted or even unavailable. This could force regions such as the Middle East and Europe to source from other origins including Australia. This possible reduction in supply has the potential to significantly increase Australian grain values. Feed grains such as Australian wheat and barley will be impacted the greatest if this scenario eventuates.

  • Perhaps more concerning is the current condition of the US winter wheat crop. Reports continue to circulate that freezing conditions are causing winterkill in a number of areas. These reports continue to become more prevalent and could have a significant impact on supply and demand fundamentals. The potential deterioration of the US crop is not good news for end users and could see prices increase from current levels.

  • Following the trend of recent weeks both Australian old and new crop increased slightly but didn’t fully mirror the gains seen in international values. This reflects the Australian basis weakening after sitting at historically high levels over the harvest period. Analysts are predicting little upside in Australian basis with values to be more directly dictated by international market movements.

  • The feed markets continue to be separated through two key regions. The north Australian feed market again saw increases on the back of international values. Until large portions of rain are received and production is relatively certain feed prices will maintain current levels. If dry conditions continue prices will be forced higher to allow grain to flow from southern NSW. Recent rains have not been enough to give confidence for the winter crop but if adequate rains are received prices will drop rapidly.

  • In southern markets inclusive of the export states of VIC, SA and WA the differentiation between wheat and feed barley prices has narrowed. Prices are now in a more traditional price range on the back of increasing barley values in recent weeks. Anecdotal reports suggest domestic purchases are down as many are reluctant to lock in supply at current levels. End users seem happy to sit on the sidelines. With the current price volatility it would seem unwise to commit to new season contracts. Early rain events across the country could see prices return to more desirable prices for end users.

National Summary - Hay:

  • There will not be a hay report this week, the next hay update will take place on Friday March 14th.

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