Global market needs Aussie grain

The world remains nervous over how it will source grain. This has been the case for some time now with poor crops in the northern hemisphere last season putting Australian grain in an enviable position of being the major source of grain to the world.

More recently the Ukraine/Russian conflict has extended those global supply concerns into the latter stages of this year as the market grapples with the disruption in grain coming from these major suppliers.

On top of this we're now in the traditionally volatile period of the calendar year for global grain markets.

Northern hemisphere crops are vulnerable to their spring, and everyone is guesstimating what the production could be before it becomes available mid-way through the calendar year.

This year there are a couple of big-ticket items circulating on northern hemisphere production estimates. Dry conditions in China, and poor crop conditions in the United States.

Underpinning all this is the very high cost of crop inputs.

Hence the global market is nervous, and rightly so. Aussie grain, where it is currently abundant, is in demand as a result.

Chicago Board of Trade May wheat reached over $A530 a tonne during the US overnight session on Monday Australian time, reflecting more than a 7 per cent increase over the week.

Since the start of April, CBOT forward futures (Dec 22 and Mar 23 delivery) have rallied more strongly to now trade at similar levels to the spot month reflecting the growing uncertainty over northern hemisphere supply.

Previously the forward months were trading at a discount as the market expected there would be more wheat in the world by the end of 2022.

Here in Australia, price differences across port zones continue to be extreme in some cases.

This is driven by very localised supply and demand factors impacting price such as quality of grades, availability, buyer needs, and supply chain capacity versus what's covered.

As an example, wheat warehoused in Geraldton and Esperance continues to trade $30-$40/t above values in Kwinana WA. APW1 in SA ports were reaching $440t port while Melbourne was $412/t and Kembla $400/t.

Feed barley continued to make $400/t in Port Adelaide, while trading $367/t Portland and $342/t FIS Kwinana. Canola continues to trade at $1000/t + oil bonifications in many locations.

There is generally demand for most grades in most locations given buyers are trying to maximise supply chains and move grain as quickly as possible.