Grain market bounces back

Steve Sloss
Steve Sloss

AFTER a nerve wracking drop last week, Australian grain markets have bounced on the combination of disappointing weekend rains and supportive releases from the USDA and International Grains Council.

Values had dropped to support levels around A$300/MT for new crop APW Multigrade wheat and A$240/MT for new crop sorghum on the back of "risk off" trade in the lead up to the USDA Quarterly Stocks report and end of quarter position squaring/profit taking on CME futures markets.

Expectations of widespread rains throughout Australian grain growing areas had also combined to take the excitement out of our local markets.

But with the USDA report delivering lower than expected stocks, Hughie delivering less than expected rain, and a new quarter ticking over - it's a whole new ball game this week.

The most important number from the USDA was their September 1 corn stocks estimate, which came in at 988 million bushels.

This was below market expectations of about 1.145 billion bushels and constituted an eight-year low in corn inventories.

Wheat stocks also fell to a four-year low of 2.104 billion bushels - which was below average analyst expectations of 2.281 billion bushels.

There had been some concern the early nature of the US corn harvest could have led to "shandying" of old crop stock with new crop harvest in the USDA's figures - so the lower than expected figure was a big relief to diehard market bulls.

Even more important for local market direction was the generally disappointing nature of the weekend's rains.

Queensland and Northern NSW grain growing regions typically received less than 15mm of rain - with most areas lucky to crack 10mm.

With a forecast for warm dry conditions over at least the next week, time is definitely running out in this area.

Most growers had been hoping for 25-50mm from this change.

It goes without saying that this disappointing Australian rainfall will likely generate some increased nervousness over global new crop supplies as our own wheat production prospects will now almost certainly struggle to top 20 million MT.

On that score, the International Grains Council's figures released over the weekend were also supportive to values. They dropped their estimate for the global wheat crop by 4.5 million MT to 657 million MT (compared to the USDA's 662.8 million MT).

In particular, they lowered their Australian wheat production estimate to 22.5 million MT (from 23 MMT), and their Russian estimate to 39 million MT (from 41 MMT).

If our outlook for the Australian crop holds true - then both the IGC and USDA still have further trimming to do.

For corn, the IGC's global production estimate of 833 million MT also provided fodder for the bulls, coming in 5.1 million MT below their most recent estimate and some 16 MMT below the USDA's current figure.

Topics:  commodities grain market comment grains markets prices sales steve sloss

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