Overnight, the markets seemed to digest the moves made on Friday, following the release of the first USDA report of the year. The US winter wheat seeding report limited the downside in price, from higher than expected US domestic grain stocks, and international supply and demand, which saw ending stocks increased by 2.6mmt. Increased production, and decreased use of wheat as feed led to the overall position change. The corn market recovered from the bottom of the market, with ending stocks decreasing by 2.23mmt on a yield correction for the US which saw 1.6mmt removed from the balance sheet. The market also found support from the encouraging discussions regarding the disputed corn cargoes, and the resale of one cargo into South Korea, as the spread to wheat is now reduced to just $1.39 US/bu. Soybeans put on 20 USc/bu over the past two sessions, with the relentless buying of beans by China, and tight US stocks the market focus ahead of the Brazilian crop coming to market.

The Aussie jumped over 90 cents in the first trading day since the disappointing jobs report in the US which gave the market reason to believe that the easing of policy which started there this month would be a drawn out proposition. Direction for us will remain internationally driven, with still 3 weeks before the RBA meets to discuss rates locally.

Domestically in northern NSW & Queensland the weather market continues to support local prices. There is much speculation that grain will be brought around from South Australia & Victorian ports to Brisbane to fill the domestic shorts. Whilst this is in theory possible, we don’t believe it will be happen at current prices. Having said that, it does have the potential to cap prices in the north, but it will be directly correlated to what southern prices do as well, & at the moment, they have also been increasing. We would expect, initially at least, for the drawing arc of grain to move further south by road. You then need to take into consideration the cost of freight as more grain moves up from the south ie. freight will get more expensive as carriers will not continue to drag grain from the south without a back load out of the north, & at the moment, there is no back loading. The lower prices in the south are also attracting speculators who are buying up grain in the south, further supporting southern prices which in turn supports prices in the north as the spread between them narrows.

Sorghum is pricing itself out of the domestic ration as consumers switch to wheat & barley. China is where the support is coming from for sorghum, but even they have started to push back on the price recently. This creates an interesting scenario as the sorghum crop suffers in hot & dry conditions & yields are only going one way – down with a mixed quality profile. Will China take SOR2 or SORS – at this stage NO! This quality is similar to what they can get out of the U.S., & traditionally China does not buy U.S. sorghum as its lower in test weight & higher in screenings which slows down their processing.  Our view would be that sorghum will work its way back into rations by the wheat & barley spread increasing in the short term. BUT at some point the whole things comes crashing down. Obviously rain is the key, along with the new crop planting window for winter grains. Its s dynamic market, so no one can put their hand on their heart & say what it will do longer term. It’s a what closely & see approach.