International grain markets were supported by higher corn values the past month which have lifted global feed grain values and provided a floor in milling wheat markets. US corn values rose after the United States Department of Agriculture (USDA) made downward revisions to corn stocks due to lower 24/25 US crop estimates.
Worsening conditions across South America, where it is too wet in Brazil and to hot and dry in Argentina, combined with worries about the health of winter wheat crops in Black Sea (unusually warm and susceptible to winterkill) and the US (freeze event across southern Plains) have also supported grain values.
This chart shows CBOT futures prices for wheat and corn $A per tonne. Source: Chicago Board of Trade (CBOT)
Lower corn stocks boost grain complex
Since late last year, global corn stocks have been lowered 4 per cent to be the lowest since 2016/17, while US corn stock estimates have been reduced 26 per cent.
With conditions less than ideal for the upcoming corn plant in southern America, further downward revisions in corn stocks are likely. The delayed planting of corn across Brazil will push crop maturation into the dry season. In central Brazil, the largest producing 2nd crop corn state Mato Grosso, has just 1 per cent planted, the slowest pace since 2011 and 2021 when corn yields were poor. Further south, the late plant opens the crop to the potential for frost damage.
In Argentina it has been hot and dry since mid-December which will impact corn yields.
In the next month or two milling wheat markets will start focussing on conditions across northern hemisphere winter wheat crops. With falling global milling wheat stocks and some emerging concerns about crops in the Black Sea (too dry), US southern Plains (too cold) and India (too hot) we expect volatility to increase in coming months providing opportunities for Australian growers to sell into better prices.
This chart shows World and US corn ending stocks.Source: USDA.
Wheat crop prospects to command attention in coming months
Falling global wheat stocks will make markets more sensitive to anything that seriously threatens global production prospects this northern hemisphere spring (March to May).
This chart shows global wheat stocks in ‘000 tonnes.Source: USDA
Oilseed markets have been volatile due to the uncertainty over the impact of trade restrictions that could affect flows of Canadian canola and US soybeans. Although the global canola balance sheet looks tight, oilseeds are highly substitutable which is why markets are on edge about the potential for changes in trade flows. Already soybeans are starting to replace canola in Europe with EU soybean imports up 16 percent against just a 5 per cent increase in canola.
Waiting for trade flows to shift
Locally, wheat prices have marked time supported by the weaker $A. Competitive offers from the Black Sea and Argentina and only lukewarm demand have seen global milling wheat prices drift sideways, with most activity locally centred around domestic feed markets.
Solid feeding demand and slow grower selling are supporting feed wheat values in east coast feed grain markets. ASW and SFW (Stock Feed Wheat) wheat delivered Melbourne/Geelong and Murray Bridge (SA) is trading around $355-365/t, building a premium above southern port values. In the north, SFW is trading around $340/t Downs. Growers will hold wheat stocks until we get a season’s break, particularly in southern areas.
A larger than normal proportion of wheat stocks remain in growers’ hands as they wait for a pick-up in export demand. Generally, the best time to sell Australian wheat is in the March-May period as wheat availability tightens ahead of the next northern hemisphere harvest.
This chart shows APW wheat prices in $A per tonne at WA and Vic ports. Source: Profarmer.
Better crops in China reduce import demand
One of the reasons behind weak global demand for wheat is increased production out of China.
China’s total grain production (corn, wheat and rice) is expected to reach 706.5 million tonnes (Mt). This is 1.6 per cent higher than the 695.4Mt produced in 2023-24, reducing its need for imports.
This is impacting demand for Australian wheat. The latest Australian Bureau of Statistics export data to the end of November 2024 reveals that less than 32,000t had been shipped to China, all in containers, since July 1, compared to 1.65Mt for the same period in 2023.
In January, China has delayed/cancelled or resold 600,000t of wheat shipments from mainly Australia. Early last year China cancelled around 1mmt of Australian wheat shipments.
China’s current winter crop condition is reportedly good.
Feed grain demand lifting
International feed grain markets have been the beneficiaries of surprise downward revisions in US corn production. Further downward revisions to global production are likely to come from south America where significant production issues are emerging.
Like with wheat, European exporters are starting to run short of corn and feed barley to export. Strong domestic livestock prices have increased feed usage and prices for feed grains in domestic EU markets have risen above export values.
This is starting to present opportunities for Australian feed barley into the Middle East and Asia. Cheap container freight rates and higher corn prices are also creating interest for Australian sorghum into China. The best pricing opportunities for Australian growers are currently local feeding markets at $340/t in the south and $315/t in the north.
Currently northern growers are harvesting bumper 5-6t/ha sorghum crops and at $340/t port or $350/t delivered Brisbane, at not much of a discount to wheat there will be plenty sold off the header.
Australian growers sell oilseeds ahead of price falls
Local growers have sold a large proportion of their canola crop with estimates of as much as 80 per cent of last year’s crop already sold. High canola prices relative to other grains at harvest encouraged growers to use canola sales to generate cash flow.
Sales were also encouraged by uncertainty surrounding trade policy manoeuvres which could affect canola and soybean trade flows. Already this has seen non-conventional canola trade at a larger than normal discount to conventional canola as markets worry about where Canadian canola (non-conventional) displaced from the US market might end up (most likely competing against Australian canola in our traditional markets ie. Japan, UAE and Pakistan).
This chart shows the WA port price for WA GM and non-GM canola in $A per tonne. Source: ProFarmer.
This table shows grower trade bids for grain in major Australian grain markets. Source: Clear Grain Exchange.
Elders Agronomy update- view from the field
Growers are focussed on harvesting sorghum in the north with western areas yielding 3-5t/ha while inner areas 7-10t/ha. Central Queensland didn’t plant too much sorghum and are focussing on preparing ground for an early chickpea plant. Being 1-2 months earlier than southern crops, CQ growers can often capture premiums for early chickpeas that fill the gap between the two crops on the subcontinent.
In southern areas, growers are sitting on spray rigs managing weeds and maximising moisture retention in areas that have picked up some of the patchy summer rainfall. Storms across the northern and central tablelands have allowed oats and fodder crops to be sown in the past week.
Generally, though there is a lot of discussion around planning the coming crop with the price outlook uncertain, particularly on pulses and canola.
The consensus has growers favouring lower cost cereals which look to have the greatest potential for upside and require less inputs. There looks like being a move back towards non-GM canola due to the price premium, although some growers are locked into certain varieties due to crop rotations and the management of summer fallow. But planning is the operative word with the hot, dry weather making it difficult for growers to commit forward expenditure on crops where there is little subsoil moisture with many opting to delay decisions for another fortnight.
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