MARS is in the fifth house of Uranus ... or something like that. Whatever the case, it feels like the planets could potentially align for at least some short term pricing opportunities for Australian grain growers in the next few weeks.
Firstly, strong Chinese sorghum demand continues to underpin East Coast values for sorghum, and - as a consequence - barley and feed wheat available for nearby delivery. In fact, old crop milling wheat (up to AH2 quality) is now effectively priced for the feed sector in the Brisbane and Newcastle port zones. At the same time, dry conditions in western and northern Queensland are seeing more and more cattle moving on to feed.
The trade is now anxious to see whether the Chinese demand can be sustained for shipments later in the year as we plough headlong into the strong global grain market inverse. Regardless, some palms are possibly already getting sweaty over the ability to supply genuine SOR1 against existing Chinese export contracts.
Secondly, we are entering that time of year where "uncertainty" over global new crop production prospects often produces at least a short-term price spike. In both 2009 and 2011, the seasonal APW highs of around A$300/MT were achieved in the last week of May, after which early season global planting and crop development concerns gave way to relatively bountiful harvests. Meanwhile, in 2010 and 2012, the rally continued all the way through to the Australian harvest as fears over drought related Black Sea and US crop failures turned into the reality of crop disasters.
Right now, there are a number of production uncertainties that are earning market wire headlines - but with most of the worry centered on too much, rather than not enough rain … any forthcoming positive market reaction might present more of a short term, rather than a long term, pricing opportunity. That said, there are definitely some crop conditions that require monitoring.
In particular, spring wheat areas on the US northern plains and Canadian prairies will soon start to run out of time to get crops in the ground - and the snow is still falling. These regions have a short growing season, so are vulnerable to a late plant. In the USA, just 7% of the spring wheat crop was in the ground at the end of last week, as opposed to 52% last year and a five-year average of 24%. Minnesota, Montana and the Dakotas are well behind, while in Canada, farms in Manitoba and Sakatchewan are still frozen and snow covered after the coldest March and April in 113 years!
There are factors at play that could align to produce some opportunistic market conditions for Aussie grain growers in the coming weeks. But as always, don't bet Uranus on it.
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