Since our last update in July barley prices have shown considerable volatility, plunging to their lowest point since early before rebounding to be only $3/mt below the closing values of July. Northern zones continue to find the most support with spread between southern zones near record levels as crop conditions in key northern growing regions continue to walk backwards at a rate of knots. Globally, domestic prices are progressively more disconnected from international prices movements with domestic barley prices increasingly take its cue from domestic wheat price movements.
Globally, despite the recent rally in CME corn values are still considerably softer than our last update. Since late July, CME has fallen over 90USc/bu to reach its lowest levels since August 2016. In recent weeks, CME corn has rallied on bargaining buying and an increasingly dry outlook for the Eastern Midwest which has seen increasing reports of crop die back. Even so, CME corn is still 38USc/bu below the levels witnessed in late July. Since June the USDA’s monthly reports have increasingly painted a bearish picture. The USDA’s July report took the market by surprise, having expected the USDA to significantly cut US corn and soybean yields following recent adverse weather, the resulting increase in global and US corn stocks saw funds heavily liquidate their long positions. The USDA August report added to the bearish sentiment with global corn, wheat and soybeans stocks again revised higher, with the USDA’s yield forecasts for corn well above trade expectations which caught them and funds off guard. Since then feed markets have consolidated with Black Sea and EU harvest pressure easing and concerns over the upcoming Southern Hemisphere harvests drawing the globes attention and providing support for values. With US corn and soybean harvest beginning to ramp it is likely we will see some harvest pressure but this could be tempered if yields off the header come in below USDA’s forecast.
Domestically, barley prices have come under pressure but not to the extent that we have witnessed overseas. Despite ASX barley touching its lowest point since early may in late August values continue struggle to compete with cheaper origins. Russian FOB feed barley is currently offered around US$185/mt, this compares with Geelong/Melbourne FOB F1 which at current values would equate to over US$231/mt. The driving force for this disconnect between domestic and export markets continues to be the acute drop in forecast Australian feed wheat and feed barley production on the East Coast. The current forecasts predict a near 40% reduction in East Coast grain production with significant shortages in NNSW and SQLD seeing markets priced accordingly to drag grain as far south as Victoria north. In the past three months the spread between delivered Downs F1 and delivered Geelong/Melbourne has ballooned from around $30/mt to over $75/mt. With the dry outlook for the East Coast forecast to continue it is likely this spread will persist until a better gauge of how to ration the 2017/18 crop can be made. Looking forward, it still appears we may have finally formed a seasonal low, however, with the world still awash with feed grain and Australia is firmly priced out export markets, at some point we will need to reconcile with a new crop exportable surplus and with ideas that rationing to date has gone too far. As such it will be increasingly difficult for the domestic market to justify further gains independent of offshore markets. However, this is tempered by the fact that if the 2017/18 crop continues to deteriorate it is possible the small export surplus will evaporate resulting in a likely further rally in domestic values independent of off shore markets.
Next Payment: November 2017
Finalisation: November 2017
FOB Changes: Various (depending on grade and port zone).
ASX Barley Prices (Jun’17-Sep’17)
CME Corn Price (Jun’17 – Sep’17)
The latest EPRs are outlined in the below table
Data published on 21 September 2017.
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Disclaimer: This is not financial or market advice or a risk management or strategy recommendation and growers should consider seeking independent advice to assess the appropriateness or otherwise of this marketing program for their personal circumstances. The information is not exhaustive and should be read in conjunction with the Special One Grain Standard Pool Management Terms and Conditions and Pool Information Sheets.