Current low sorghum values are expected to see farmers slash plantings this spring.
Sorghum prices are on the verge of dipping below $200 delivered into the key Darling Downs markets for the first time since 2012. Last week Darling Downs sorghum prices fell by a further $6 a tonne last week to $210 delivered.
Tumbling prices has farmers considering alternatives summer crops to sorghum when soil temperatures begin to climb in the spring. Farmers are widely expected to thumb their nose at sorghum at current prices, with plantings expected to fall sharply.
Farmers have enjoyed a period of strong sorghum values in recent years. This has been largely driven by the emergence of China as a major sorghum importer in the past four seasons, where they have outbid the traditional export destination, Japan.
This saw sorghum prices climb above $300 a tonne into the Darling Downs market in 2013, 2014 and again in 2015. This was good news for farmers, particularly when it coincided with some excellent yields.
However the historically high sorghum prices into China saw the United States ramp up production, at the expense of other crops including corn and cotton. Massive increases in the US sorghum crop combined with an oversupply of feed grains in China has sent global prices tumbling, which is being reflected in the domestic market.
Cotton, mung beans and sunflowers plantings are all expected to climb as a result of the current low sorghum prices.
Cotton prices above $500 a bale are attracting a lot of interest with farmers compared with values of under $400 last September. Cotton plantings plummeted last year because of reduced water availability but the higher values and improved rainfall is expected to result in a significant turnaround.
Mung beans plantings are also expected to expand, helped by the recent record high pulse prices. Mung beans were steady last week at $1100 delivered Brisbane.
Wheat prices continued to sag last week. Darling Downs old crop feed wheat slipped a further $4 to $238 Delivered. New crop export prices into Brisbane are now down to $243 for APW multigrade. This is also the lowest since 2012.
However global wheat markets posted a rare bounce last week as traders fear excessive wet weather in Europe will result in a massive downgrade in their harvest. The USDA will update its world supply and demand estimates late this week where they are broadly expected to lop close to 10 million tonnes from their previous forecast as they take into account the poor yields coming out of France, parts of Germany as well as some other areas in Europe.
But despite the expected huge reduction in the size of the European harvest, global markets remains relaxed with the supply situation with huge crops in most other major export locations.
The USDA is expected to raise its estimates of the Black Sea wheat crop on the back of record large yields in Russia. Australia and Canada’s wheat crops are also expected to be increased this week but overall exporter wheat supplies are expected to be lowered as a result a significantly smaller EU supplies.
Leaving aside last week’s modest rally in US wheat futures, global wheat markets remain reasonably relaxed about the impacts of the extreme wet weather on the EU crop.