Market Insider

Looking South for Grain Prices

Grain prices in Western Canada this week were generally higher, responding to a weakening Canadian loonie. Also helping canola prices was snow in Alberta’s Peace region. (We saw $12 CAD / bushel for spring 2018 movement trade on the FarmLead Marketplace this week). Another factor affecting canola prices may be Australia's smaller canola crop. Currently, the USDA is forecasting 3 million tonnes of canola production in the Land Down Undaa. This is the highest estimate though.

The International Grains Council (IGC) and Rabobank both dropped their estimates recently to 2.7 and 2.6 million tonnes, respectively. That’s a significant drop from last year’s 4.14 million-tonne canola harvest by Australian farmers. Currently, ABARES (the USDA equivalent in Australia), expects a 2.75-million tonne harvest. This includes 2.04 million tonnes of exports, but that would be a 43% decline in exports year-over-year.

Flipping gears, the Commonwealth Bank of Australia says that Australian prices are extremely divided. The harvest this year in southern Australia went fairly well. As such, Australian Premium White (minimum 10% protein) wheat prices at Adelaide are sitting at about $175 USD/metric tonne (or $4.75 USD and $6.10 CAD per bushel). For comparison, US soft red winter wheat prices at Gulf of Mexico ports are currently trading around $183 USD per metric tonne (or $5 USD and $6.40 CAD per bushel). 

The harvest in the New South Wales wasn’t that great because of the drought conditions. There, APW wheat prices at the port are being bid at $218.70 USD per metric tonne (or $5.95 USD and $7.65 CAD per bushel). At these prices, it’s hard to be competitive in the export market. As such, Rabobank has lowered its forecast for Australian wheat exports to 17 million tonnes. This coincides with the Dutch firm dropping its estimate of the Aussie wheat harvest to 20.9 million tonnes. Rabobank’s estimates compare to:

·       USDA: 21.5 million tonnes of wheat production, 18 million tonnes of wheat exports;

·       ABARES: 21.6 million tonnes of production, 18.15 million tonnes of exports;

·       IGC: 20.5 million tonnes of output, 19 million tonnes.

Heading even further north into the major cattle-feedings state of Queensland, wheat prices are even higher. For Australian Soft White Wheat (maximum 9.5% protein), prices are trading around $250 USD per metric tonne (or $6.80 USD and $8.75 CAD per bushel). At those prices in the north, if you have the product, hoping for a higher price would be the opposite of good price risk management.

Will these prices make their way into the Northern Hemisphere? I would equate this to more of a domestic market push. However, combined with some weaker currency factors, Canadian wheat prices might make a bit more of a stronger push in the next couple weeks. We said all the way back in September to hold on to better quality wheat and oilseeds. In the next few days and/or weeks, pulling the trigger on a sale is a good idea.

To growth,

Brennan Turner
President & CEO | FarmLead.com