All about the national and international grain market and how grain contributes to farm inputs and costs.
International and national summary
National background comments: report for the week ending 17th August, 2018
The next update will be on Friday 24th August, 2018. Direct links to reports on each dairy region immediately follow this international and national summary for grain.
Driving Prices Up
- Despite the fact that this month’s USDA World Supply and Demand Estimates report took some of the heat out of offshore grain and oilseed markets, the past week sings that some export demand may have shifted away from lower cost exporters towards other exporters such as the US.
- This week’s weekly USDA export sales of US wheat came in around double market expectations at 800 thousand tonnes.
- This month’s USDA WASDE report indicated that exports from Russia which have been a key source of the downward price pressure seen in global grain markets in recent years are set to decline 17% year on year.
- Hence the need for some of this export business to be coursed from other (likely more expensive exporters) looms as one factor that could push up global grain values this year.
Driving Prices Down
- Although tightening global supplies of wheat and corn has been pushing offshore grain and oilseed markets higher the release of this month’s USDA WASDE report took some of the heat out of offshore grain and oilseed markets.
- On face values the updated wheat estimates would typically be expected to push offshore wheat markets, such as CBOT wheat futures higher.
- Current estimates now show what ending stocks as being down by 5% year on year (at 258 million tonnes versus 273 million tonnes in 2017), with this report having pulled back this number by a further 2 million tonnes.
- Similarly, in the 2018 season world wheat production is still set to decline by 6.6 million tonnes a 4% decline (739 million tonnes versus 729 million tonnes).
- Tightening of global corn stocks has been cited as having the ability to push global feed grain values higher this season, this report showed a marginal month on month increase in 2018 global corn production and end stocks.
- However, global corn end stocks and production are still set to decline by 20% and 3% respectively in 2018.
- Offshore grain markets had been expecting much bigger cuts in both production and end stock estimate hence the same markets experienced sharp losses immediately following the release of this report.
Global Trade News
- Over the past week it has been announced that a Chinese delegation will visits the US later this month in order to discuss recent trade tensions between these two countries which have led to the implementation of several import tariffs by either country on goods from the other.
- While these talks are not likely to lead to a final resolution to US/China trade tensions offshore grain and oilseed markets did see this as a sign that these two countries will be looking to sort our trade tensions
- Given the importance of Chinese demand for US beans in the global feed/oilseed trade (around 100 million tonnes in recent years) this news pushed CBOT soybean and other offshore grain and oilseed markets higher.
- Prior to their implementation, while there had been some market uncertainty about what impact Chinese import tariffs on US soybeans would have on global trade slow of soybeans and other feed sources.
- However, it now seems as though the main ramifications have been more Brazilian/South American beans going to China and that US beans have had to price themselves more competitively in order to find alternate export demand.
- Hence any move towards a resolution of US/China trade tensions would be likely to place upwards pressure on CBOT soybean and as a result other global oilseed/feed values.
- With key livestock and grain growing areas having received little abatement in terms of rainfall over the past week local grain values remain at or near record highs in a number of locations, with the great level of upward price pressure being seen in Queensland and New South Wales.
- The weakness seen in offshore markets over the past week has led to a divergence of buyer and seller price expectations, which has put a lid on liquidity in local markets.
- While the buy side have pulled back their bids in repose to this weakness the sell has remained firmer in their price expectations.
Price change in table below reflects moves since previous report (10 July 2018)