Rain makes it game on… | Nidera

Rain makes it game on…


A hint of optimism across the entire agricultural sector with the seasonal change throughout northern NSW and Queensland says Nidera Australia origination manager Peter McMeekin.

A hint of optimism across the entire agricultural sector with the seasonal change throughout northern NSW and Queensland says Nidera Australia origination manager Peter McMeekin.

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A hint of optimism across the entire agricultural sector with the seasonal change throughout northern NSW and Queensland.

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THE change in seasonal conditions throughout northern NSW and Queensland has been quite dramatic since the beginning of October. The dry tone, and pessimistic mood, has been replaced by a hint of optimism across the entire agricultural sector.

Late last month, many growers in the region were wondering if it would ever rain again, after the winter-long drought had extended through September. Now they are wondering if the tap will turn off for long enough to let the winter crop harvest resume, and the sorghum plant commence.

Spring rainfall is always a bit of a Catch-22 situation in the summer cropping regions. If it falls in early September, it is perfect. The winter crop gets a finishing rain, and the moisture profile is established for the summer crop planting program.

October rains have now ensured the sorghum plant will commence. - Peter McMeekin

If it arrives in October or November, the summer crop planting window is still open, but it could be too late for the winter crop to derive much benefit in many areas, and it starts to disrupt the harvest program. This is especially the case in a season like this year, where the crop is quite advanced following a long dry spell.

Nevertheless, the October rains have now ensured the sorghum plant will commence, and the area available is quite large. There are paddocks that have been allocated to sorghum as part of the regular crop rotation. Add the paddocks left fallow, due to lack of moisture for a winter crop plant, and those where the winter crop was planted, but subsequently abandoned, and the potential area becomes significant.

Despite the significant discount to white grains, there is also sufficient price incentive for the grower to plant sorghum. With bids currently around $270 delivered Darling Downs for March/April, the gross margins and risk profile stack up quite well when compared to the alternatives, especially for the dryland grower.

The sorghum price relative to white grains will be a significant demand driver as well. Six months ago, wheat delivered Darling Downs was trading at a $15 discount to sorghum. Today, wheat and barley are quoted at around $65 and $55 over new crop sorghum values respectively.

The current price disparity will undoubtedly increase sorghum demand in the northern feed grain markets. Feed grain consumers are constantly reassessing the cost of their ration, and altering the inputs to realise the least-cost option. A year-on-year increase of 25-30 per cent is certainly possible. If the white grain premium is maintained through harvest, and into 2018, then it could be more.

The poultry sector is already looking to maximise sorghum inclusion in their ration. It is not something that happens overnight, but as the certainty around sorghum production improves, and the price incentive remains, then the consumer will reposition to decrease their ration cost.

The biggest unknown is the beef sector. Many of the large feedlot enterprises have not included sorghum in their ration for a number of years. Most rations have revolved around wheat and barley, with price relativity and production uncertainty, thwarting a significant sorghum inclusion rate.

This year may be quite different. On the back of the potential area, and the good planting rains, the crop could easily be 1.8 million tonnes. If the favourable conditions continue, then more than 2mt is achievable. With a crop that big, and a juicy price incentive to boot, the jump is likely to happen. However, it is the size of that jump that is the biggest unknown from a total domestic demand viewpoint.

A crop of that size also needs to find export demand. The Central Queensland crop is already priced into that pathway. Assuming the crop is planted in the usual early New Year window, then it should find its way into the Chinese market. There is currently no need for the production from that region to make its way south into the Darling Downs or Brisbane feed markets.

We know that the Brisbane zone will be driven by the increasing domestic demand. Likewise, the Newcastle zone will see the domestic demand draw sorghum north into Queensland, as well into the Liverpool Plains and Newcastle markets

A big crop almost certainly means that exports will need to happen out of the Brisbane or Newcastle zones. The final quantity will depend on domestic production, the voracity of the Chinese alcohol market demand, and our competitiveness into that export pathway.

- Peter McMeekin is Nidera Australia’s origination manager. 

The story Rain makes it game on… | Nidera first appeared on Queensland Country Life.

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