Demand for Australian grain is strong.
Supplies from other global exporters remain constricted and uncertain into the back end of this year, which continues to help underpin the demand for Australian grain.
The Australian dollar slid lower again this week to 70 US cents at the time of writing. International freight is holding firm as COVID disruptions continue to create havoc on global supply chains.
A combination of a softer Australian dollar and firmer freight strengthens the competitiveness of Australian grains to our major export customers, particularly those in Asia given our closer proximity.
Australian grain prices are well supported now. Yet price discrepancies between international markets and across Australian port zones is frustrating for many.
Just this last week APW1 wheat traded $435 a tonne FIS in Kwinana and $500/t port in Pt Adelaide, and all variations of prices in between at different port zones elsewhere in the country.
In the month of March 64 buyers purchased grain through Clear Grain Exchange, 57 in April, and so far in May 45 different buyers have purchased Australian grain through the exchange.
Those numbers are high and are an indicator of strong buyer demand. Additionally, there were more buyers searching for grain to buy.
So why aren't all prices across the country reflecting this demand and trading at similar levels closer to export parity?
Grain demand is generally strong but can also be jumpy and unpredictable.
Limited supply chain capacity to move grain out of Australia has been well commented on by the industry, and there's no doubt this is having an impact.
As supply chain operators work hard to release more capacity, this can have an immediate impact as buyers then try to buy grain in those locations. However, this is not the only contributor to price differences.
Like any business, grain buyers need to manage their cashflow and at high prices it takes more money to purchase grain which can limit demand at any time.
This was particularly evident during the harvest months when many growers were sellers and buyers were trying to push it out the door, get paid for it, recharge and then buy more.
Buyers want Aussie grain but managing their cashflow during the current high price environment is likely to continue to cause spurts of demand.
Another factor is the price growers are asking for their grain. Often there is more value available than what is being bid and growers should remember that just like a buyer can show their bid price a grower can show their offer price.
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