July 26, 2010

Grain continues cheaper run in southern Australia

Improved grain production in southern Australia following a much better season has allowed for cheaper grain.

Feed grain prices have been in decline since peaking in mid-2008, a symptom of the global recession, high global grain supplies and higher local supplies in comparison to feed demand.

Although less volatile in recent months, prices in June averaged AUD261/tonne (US$233) for feed barley (delivered Sydney), AUD219/tonne (US$196) for wheat, and AUD203/tonne for sorghum - around 18% cheaper than a year earlier and close to 45% cheaper than the corresponding period in 2008.

However, the combination of the improved seasonal conditions in south-east Australia and the poor northern summer harvest has resulted in a spread opening between northern and southern feed grain prices. Low summer plantings in response to weak prices, along with mid-harvest rain causing quality reductions, have resulted in a tight northern feed balance sheet, with prices responding accordingly.

In contrast, vastly improved yields in southern cropping regions on the back of a much better season has allowed for cheaper, plentiful grain. For the month of June, feed wheat was around AUD40/tonne (US$36), or 23% more expensive in the Darling Downs than the Riverina.