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Only psychics can predict the markets

THE online urban dictionary flippantly defines a psychic as "a person with a supernatural talent for finding money".

Needless to say, a couple of psychics would be handy in Australian agriculture right now.

Let's face it - forecasting grain markets, particularly new crop markets, is basically just a crystal ball "rub-a-thon".

But with growers in Central Queensland tossing a coin on whether to plant late sorghum or hold off for wheat or chickpeas, and with winter crop planting now just a matter of months away up and down the east coast, the least we can do is ponder a few "what ifs".

And on that score, the biggie is what if it rains?

There could be a number of domestic market implications depending on timing and location of any precipitation.

Moderate rains (say 50-100mm) in northern NSW and southern Queensland the next week or two will shore up production potential for sorghum crops on the Liverpool Plains and parts of the Darling Downs.

The Plains received some good rain since late last week, and there is more in the forecast both there and on the Downs.

That said, with inventories of all grain incredibly tight in southern Qld/northern NSW - the reality is no amount of "crop boosting" rain will be sufficient to leave us with a comfortable regional balance sheet in the drought deficit Brisbane port zone.

While moderate rains in northern NSW/southern Queensland would take the heat out of the Brisbane market, it would be unlikely to generate a price capitulation in the short term.

Solid rains (150-200mm) will be needed for many from Narrabri through to the Darling Downs in order to generate a moisture profile for winter crop.

After a bone dry spring and summer so far, this feels like a tall order, but we've still got time and it could happen.

Possibly more important would be the impact of decent rain in grazing districts of north-west NSW and Queensland.

Much of these dry areas have had moderate rain in the last week, with forecasts for plenty more in the next few days.

If this is sufficient to generate pasture growth, there will logically be a reduced cattle feeding requirement.

At the "extremes" the longer term "risk" of sufficient rain to plant a decent winter crop and regenerate pasture growth could see prices in Brisbane and Newcastle return to export parity early in the New Year - when new crop wheat and barley become available to alleviate the existing domestic supply deficits.

The question then is where is export parity?

Market activity in recent weeks has provided some clues.

Firstly, on futures markets we have seen strong support around the US$5.50/bu level for wheat and around US$4.10-4.20/bu for corn - on a combination of strong sovereign nation export demand, and technical buying from the fund sector.

Clearly, these support zones could falter if the northern hemisphere produces a bumper wheat and/or corn crop.

And what about the Aussie dollar?

The point to keep in mind is all else being equal, a one cent movement in the exchange rate equates to about A$3/MT for Aussie grain prices.

So if you believe the RBA's recent jawboning for an 0.85 cent dollar, then "export zone" support for APW wheat would potentially shift closer to A$270-275/MT NTP.

Topics:  commodities markets matt schmerl