November 19, 2007

Ongoing harvest, low world prices eases Australian grain market

Meat and Livestock Australia reports that Australian grain market settled back in recent weeks with harvesting continues to gather pace and world prices falling following weaker demand and forecasts of increased supplies. However, feed grain buyers admit that prices will remain historically high for some time despite the drop.

With the winter grain harvest now underway across Australia, MLA said a clearer supply picture has assisted in bringing feed grain prices back from their record highs of early October. After hitting A$480/tonne five weeks earlier, feed wheat prices have lessened by 8 percent, to A$440 tonne, while feed oats have slipped 15 percent. Slow demand for feed barley has contributed to low prices, dropping at 26 percent since the start of October, to A$345/tonne, with the West Australia harvest reportedly looking better than expected.

However, while the recent decline in feed grain prices will be a welcome change in fortune for grain dependent industries, buyers said prices for wheat and sorghum remain 44 percent and 41 percent, respectively, above last year.

Recent rain across southern Queensland provided a timely boost to sorghum yields, while some regions of northern NSW will still require good falls in the coming weeks to commit to planting.

Recent grain forecasts by the United States Department of Agriculture (USDA) have also assisted to settle the market, with global wheat production for 2007-08 projected at 603 million tonnes - up 2.8 million tonnes from the previous month. While US production remains steady, increased production from Argentina, China and Ethiopia is expected to offset reductions in Australia and Brazil.

The USDA has forecast the Australian wheat harvest for 2007-08 at 13 million tonnes - 7 percent higher than forecasts by the Australian agricultural statistics.