Last week Chicago Board of Trade futures gained $A4.64 a tonne. The Australian market followed with gains of A$5/t in most port zones.
The latest moves leave Newcastle prices $90/t ahead of Port Adelaide prices. Last year that was enough to ensure that grain moved east from SA by rail. We are also seeing Port Adelaide prices equal prices being listed in the Kwinana zone in WA. That puts the SA market at a $20 to $25/t premium to where they would normally sit.
All of this is consistent with the market setting itself up for west to east grain movements to cover yet another drought induced feed grain shortage in NSW and Qld.
However, exports will still have to move from SA and WA, and prices will have to remain in touch with global prices. At the moment WA new season prices are running about $20/t higher than they would normally be relative to CBOT futures.
Overall the Australian market seems to be setting itself up without the extreme premiums to export parity that we saw at this time last year. It will be interesting to see if that disciplined market structure is retained as the WA and NSW crops continue to come under pressure.
Meanwhile the last week has delivered rain across nearly all of the SA grain belt, and over the border into Vic. The rains are in time to have at least held yield potential for a couple of weeks, setting crops up to fill on Eyre and Yorke peninsulas. However, grain from these regions normally heads to export because of distance and the lack of infrastructure to service the east coast market.
SA's Port Adelaide zone is where grain for NSW and Vic originates from. The rains so far in September have held yield potential at around 90 per cent of average. Last year we ended the year with rainfall indicating production at 75pc of average with potential at 83pc of average in mid-September.
Based on growing season rainfall, there is every chance that yield potential in SA will be as much as 10 to 15pc higher this year compared to last year. The latest rains should also secure better production in the pure export zones. In both cases it will help cover the production shortfall now expected in WA.
Rainfall records are also showing a much better season for Vic this year. Increased production in SA and Vic looks set to relieve the eastern states supply pressure for the grain markets compared to 2018.
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