Grain prices are expected to remain high for the majority of 2019, with dry conditions continuing to have an effect on local prices.
Rabobank’s Australian Agribusiness 2019 Outlook reveals wheat stocks have dipped to their lowest levels in a decade and, with no sign of the extended dry breaking, stocks are expected to remain low.
‘‘Local prices will remain well above global prices until the new crop becomes available near Q4 2019,’’ the report said.
‘‘In fact, (prices) will likely remain high into 2020 as Australian stocks are rebuilt.’’
Going against the grain of eastern Australia, Western Australia delivered a 2018-19 wheat harvest eight per cent above average, and will benefit from east coast demand.
But WA will continue to be more exposed to the volatility of global markets that can be expected as ongoing trade announcements trigger soybean, wheat and corn market and currency movements.
With global barley stocks dipping to 30-year lows, Australian barley stocks will continue to be ‘‘extremely tight’’.
‘‘Both local and international support is expected for barley in 2019 ... Despite a strongly supportive outlook for Australian barley prices, China’s November 2018 initiation of an anti-dumping investigation will hang over the market in 2019,’’ the report said.
‘‘Australian feed and malting barley prices moved to decade-highs in 2019, hand-in-hand with wheat, and on many occasions with limited to no price spreads.’’
Local feed grain use has driven demand and is expected to keep prices up, and push prices even higher should there not be a return to average seasonal conditions.
However, the Australian Bureau of Agricultural and Resource Economics and Sciences forecast for 1.4million tonnes (18 per cent below average) will deliver minimal softening to the feed-grain price this year, with Rabobank predicting continuing high feed-grain prices will prompt expanded cereal hectares at the expense of canola hectares in 2019.
National winter crop production was forecast to be almost a quarter below last year, with winter crop forecasts of wheat falling by 20 per cent to around 17million tonnes, barley production forecast to fall by 18 per cent to around 7.3million tonnes and canola production forecast to fall by 39 per cent to around 2.2million tonnes.
Dairy Australia’s hay and grain report pointed to continued pressure on input costs, with the recent sorghum crop hampered by conditions and buyers hesitant to look too far ahead due to the ‘‘record high’’ prices.
‘‘While the preference of domestic buyers to make purchases on a hand-to-mouth basis is highly likely to see liquidity come in and out of the market in the coming months, the fundamentals which have gotten the market to where it is currently sitting (that is, feed grain shortage on the east coast and the movement of grain from WA to the east coast) do not look like changing,’’ the report said.
‘‘At earlier times this season it had been hoped that a strong sorghum crop would be able to relieve some of the tightness on northern grain markets.
‘‘However, a recent lack of rainfall may well mean a year-on-year decline in sorghum production.’’