It’s beginning to feel a lot like Summer… The month of December has certainly heated up with rainfall becoming more sporadic and rarely having more than a few millimeters compared with the showers over November. Large areas of NSW and Qld are still suffering from severe drought and the quantities of rain needed to relieve these areas are nowhere in sight. This continues to be the major factor in price movements for both remaining grain stocks and new crop sorghum in the ground. Feed buyers are facing a situation of having to continue to purchase feed for the months ahead, with stocks available to them already tight and little chance of sufficient quantities of summer grains to replenish stocks. This has been the driving concern throughout harvest and the reason Newcastle and Brisbane zones remain insulated from the weakening in global grain prices.

With most of the harvest having been completed by the beginning of December, focus turned to the question of whether to market or hold remaining stocks. There has been a steady pace of selling throughout the month, with growers particularly active on selling stocks in the system before the first warehousing fees kick in at the end of December. Sites north of Narrabri have benefitted from the demand for feed grains moving north with premiums above generic bids being available in these sites. Most other Newcastle sites have been trading in a pretty tight range of a few dollars movement, with APW fluctuating between $300 and $306 over the last few weeks. Growers with stocks on farm are more proud owners with an eye to pricing in the new year with many growers holding the view that prices will continue to improve as remaining stocks tighten. $300 on farm prices for 70/10 have pushed south of the border and creeping up to $290 around Moree, while feed users have become more active on the Liverpool Plains also. There are still buyers chasing protein wheat specifically, particularly in to Narrabri packers, with prices holding around $300 delivered Narrabri for APH wheat, however high protein further north has been priced directly in to feed, while demand delivered to Newcastle port has been having difficulty competing with feed prices also. Of other remaining stocks, barley has also had a steady increase throughout the month for the same reasons as driving wheat, while the pulse markets have come right off the boil with demand evaporating. One of the best performers of the last month has been durum, with prices first pushing above $300 for stocks in the system early in the month. Given the length of time it took to reach this level many growers took the opportunity to quit stocks at this time, however prices had one more push in them and the limited stocks still available were looking at site prices of above $320.

For many growers focus has now turned to summer crop, with planting of sorghum taking place on the Liverpool Plains due to decent showers throughout November. There were many more areas which would have gone in to sorghum north of Boggabri and around Narrabri but are unlikely to be planted now unless there are several inches before the new year. Prices have improved through the month with strong demand coming from export destinations as well as domestic feed users. Many growers planting on the Liverpool Plains have taken cover for up to a quarter of the crop in the ground. Prices for Newcastle have been over $310 as the track number, or pricing on farm has been up to $316 delivered Newcastle port, in to Tamworth at $290 or in to Narrabri at $270. Prices in to Brisbane have been even stronger, with track prices up to $320 and delivered to Brisbane port at $330, however production is far less certain for stocks that can feed in to these markets and selling more limited. That being said, more acreage can potentially go in in Queensland, with the window for planting able to stretch in to the New Year, however there would need to be several inches to see this happen.

Cotton also was a surprise with their most encouraging move for several months. Solid gains in futures markets were matched by a falling Aussie dollar pushing below 0.90USD, which saw gains of over $30 dollars in the space of a week as cash prices burst out of the trading range of several months. Prices had been struggling to exceed $470 after coming off several months ago, with some prices pushing up to $500 in the back end of December. Growers have become re-engaged with the cotton market and further sales have been made around the $500 level. Those growers who were not confident enough to lock prices in prior to planting when it hit $500/bale have now taken the opportunity, with most growers looking to at least have 50% of their crop priced at these levels.

So, what can we expect in the new year? To state the obvious, we need rain. Everywhere. And a lot of it. Winter crop planting may be some time away but a dry few months ahead is a major concern, while there are many growers in the west who are looking down the barrel of consecutive seasons with no production. Over the next few months this dryness will support prices for remaining winter crop stocks in the north, and potentially push further south to source stocks if dryness persists, while also being a major support to those who managed to get sorghum in the ground. Harvesting of summer crops will be next up, with the first sorghum crops coming off around Moree by the start of March and cotton picking not long after that.

The team at AgVantage would like to thank all our growers for their support throughout what has been a challenging season. Merry Christmas, and here is to a happy, prosperous, and hopefully wet 2014.