High grain prices to retreat
Farmers have been enjoying strong grain prices but experts say they won’t last because the coming season’s crop is expected to be bigger than last year’s, plus low oil prices could force grain prices lower.
Dry conditions across Australia last year meant farmers had their smallest crop in 12 years, leading to higher prices amid tight supply. And the COVID-19 pandemic increased demand for staples such as bread and pasta, driving up wheat sales.
CBH head of marketing and trading Jason Craig said the nation’s grain growers have also benefited from major competitor Russia imposing a seven million tonne export limit, which applies until its harvest begins in June. Buyers of Russian wheat had looked to Australia for alternative supply in the short-term.
As the State’s farmers sow their crops for this year, MarketAg grower adviser Peter Rees said most of WA’s 2019 wheat crop from last year had already been sold, and shipments were progressing.
With more favourable seasonal conditions expected this season Australia is expecting a bigger harvest and prices would be lower.
Headwinds they also face include the collapse in global oil prices leading to a decline in worldwide ethanol and biodiesel production, affecting canola and feed barley pricing.
Mr Rees said unless oil demand rebounds, big volumes of US corn normally used for ethanol production was likely to find its way on to the international feed market. This would have the potential to reduce demand and affect prices for the coming harvest’s feed barley crop.
Mr Craig said more than 60 per cent of canola imported by Europe was used for biodiesel, so the decline in that production would also trigger a surplus of canola.
Mr Rees said the grain pricing outlook would not affect the mix of crops planted as much as seasonal conditions.
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