AUSTRALIAN farmers are unenthusiastic about selling remaining warehoused grain, in particular wheat, at current levels, as they wait to assess whether moisture issues with the summer crop lead to a domestic premium for feed grain.
International wheat values have been in a steady slide since the US Department of Agriculture (USDA) issued a report bearish for prices just before Christmas, and have shed around $20-25/t in local values.
Falls in the Australian market have been less pronounced than the decline internationally, with basis strengthening on the back of growing concerns surrounding the availability of feed grain in the northern states due to the poor condition of the summer crop.
Current estimates are that 75pc of the Australian winter crop is marketed. Barley and canola have been extensively sold, with more reserves of wheat remaining.
AgFarm Bendigo account manager Fabian Devereux said feedlots in NSW and Queensland were hunting for substitutes for sorghum this year, due to the dry conditions in the summer cropping belt.
He said there were not many alternatives, with the only Australian reserves of lower quality wheat in WA, which had harvest rain.
“End users from the Central West of NSW and north are looking to get hold of alternatives and they are snapping up any feed barley around on the east coast.”
Mr Devereux said while the majority of barley had been priced, there were still some stocks of unsold barley.
He said the demand was narrowing the spread between malt and feed barley, particularly with malt demand virtually satisfied.
“The spreads have closed right up in the barley sector.”
Overall, Mr Devereux said around 75pc of the national winter crop had been priced.
“Canola is virtually all sold, prices at harvest time were seen as strong, and it is 95pc or more sold.
“Wheat is the one that farmers are sitting on, especially in areas where they did not harvest until prices began to drop.”
Victorian Farmers Federation (VFF) grains group president Andrew Weidemann agreed with Mr Devereux that around three quarters of the crop had been sold.
Along with the major crops, Mr Weidemann said pulse producers had rushed to sell their beans, which are currently at near record prices, and chickpeas.
Lentil prices are coming back off very low levels, and Mr Weidemann said farmers holding grain generally had wheat and pulses to sell later.
He said farmers were comfortable sitting on parcels of unsold wheat, especially with the potential for further production issues in the northern hemisphere, such as on the US Great Plains.
“They’ve generated their cash flow with canola and barley and sold some of the wheat, now we’ve got a bit of a holding pattern, after some wheat was released just before warehousing fees kicked in at the start of January.
“Most of the grain will be marketed before northern hemisphere factors start influencing the market, but with the US drought concerns, there will be some people who will have a punt with up to 10pc of their crop, hoping for northern hemisphere weather concerns to send the market up.”
Mr Weidemann said farmers were unwilling to sell given the world supply and demand dynamics.
“It’s clear there are still production issues, and farmers with unsold wheat are holding on for better prices, its something they have got used to doing in the last couple of years and they are comfortable with the risk.”
He said the dry conditions not only were having an impact on the summer crop, but on the 2013 winter crop.
“The difference between the upcoming year and the last few is that we don’t have that subsoil moisture as yet, so not only are farmers looking at northern hemisphere issues leading into this year, there is also a chance there may be problems here.
“This means grain is held on-farm, whether it be to marketed when a local drought premium emerges, or stored for use in mixed farmers’ livestock operations, but either way it tightens the stocks available now.”
Mr Devereux said the Australian market was waiting for a lead.
“Currently, due to the strong basis, Australian wheat is not competitive on the international market, but equally, marketers are finding it hard to attract grain at present values, so we are really waiting for a lead, which perhaps will come from this week’s USDA report, which we will get Saturday morning.”