Topics:  columns, comment, commodities, grains, markets, sorghum, steve sloss

Sorghum hits a hot spot

Steve Sloss
Steve Sloss

HEATWAVE conditions on Australia's east coast have pushed sorghum values back up to their late September/early October highs - with the hot, dry conditions also helping keep wheat values firm as growers' selling appetite starts to wane.

The bulk of the Darling Downs sorghum crop is feeling the pinch - although some areas have benefited from recent, patchy storms.

Along the border and south into northern New South Wales estimates suggest the lack of any meaningful rain since mid-July mean sorghum plantings to date are only around 20-25% of "normal", and what is in the ground is seriously struggling.

The current bout of hot conditions is clearly not helpful, and - while there is theoretically still time to plant - at least 75mm or rain is probably needed, and you won't get a tractor back on to black soil after that sort of rain for a while.

At current prices, growers will still plant sorghum in northern NSW up to Christmas, so any rain would need to fall in the next week or so to allow time for the ground to dry out.

The strong sorghum values could start to make ASW wheat (and lower) - and particularly F1 barley - increasingly attractive as a feed-grain alternative, which would add another rung of support below the market.

Traders will be encouraged by Egypt's GASC return to the wheat market.

Of the 400,000MT purchased at tender over the weekend, 280,000MT was US origin - including SWW and SRW at between US$336 and US$337.50/MT FOB.

GASC also purchased 60,000MT apiece of French and Romanian at US$360 and US$362/MT respectively.

Once freight was included, on a C&F basis these prices were all pretty comparable.

The point is that US wheat does not need to get any cheaper in order to win additional export business, which should be supportive for Chicago wheat futures.

Clearly, the assumption that "cheap sellers" would be sold out by the end of the year is starting to play out.

There appears to be very little available wheat for export out of the Black Sea and Ukraine, European wheat has been selling heavily into export markets over the last six to eight weeks, and South American wheat has its own set of quality and supply issues after a rain plagued harvest.

With Australian wheat crop estimates continuing to shrink - combined with potential for domestic substitution into feed rations - our own exportable supplies are likely to be a lot lower than current official "think tank" estimates.

ABARE's Australian wheat production estimate of 22 million MT released this week is a case in point - and looks to be about 10% over the odds.

All of this suggests - as anticipated - that statistical grain tightness will start to bite in physical markets as we head into the new year.



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