![Stefan Meyer, StoneX, believes grain production estimates across Australia are falling on the back of hot weather cutting yield potential. Photo courtesy StoneX. Stefan Meyer, StoneX, believes grain production estimates across Australia are falling on the back of hot weather cutting yield potential. Photo courtesy StoneX.](/images/transform/v1/crop/frm/5Q2j7ezUfQBfUJsaqK3gfB/0e08dce0-933c-4079-9121-128818a5840e.JPG/r0_0_1600_900_w1200_h678_fmax.jpg)
DEMAND for grain from northern end users, particularly lotfeeders, will help create a floor in domestic grain markets over coming months as the dry conditions continue to bite in the intensive livestock sector's southern Queensland and northern NSW heartland.
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Stefan Meyer, StoneX cash grains broker, said prices were already pushing north of $450 a tonne for cereals on the Darling Downs.
"We're seeing prices of $480 a tonne for wheat and $460/t for barley, the feeders know supply is going to get tighter and they're being quite aggressive with their purchasing," he said.
Mr Meyer said at present demand was likely to be satisfied via east coast and South Australian producers but added there was the possibility of Western Australian grain coming around on boats, like it did during the previous drought.
"At present WA grain is not priced into going to Queensland just working on rough figures of $400/t for ASW quality wheat in the Kwinana port zone and estimated freight costs of around $125/t but it is possible that it could become economical once again if there is either a drop in price there or a continued rise in the north."
The argument against the boat trade, which was an important source of grain during the previous 2018-19 droughts, was that the prospects of the WA crop continue to decline on the back of hot weather over early September in dry parts of the northern wheat belt, while there is improved availability of east coast rail freight and declining road freight rates compared to the previous drought
"We've seen road rates drop from 22 cents a kilometre to 14c/km and we've also seen the grain exporters increase their freight capacity with more trains over the past year, which add significant capacity."
Grain Producers Australia board member and Moree farmer Matthew Madden said that while there would need to be grain brought in from outside the area he did not think it would come all the way from Western Australia.
"The first place buyers will look is to the Central West which is freight advantaged to this area and then if that does not satisfy the demand they'll look further afield if needed," he said.
"I don't think grain will come around by boat yet, the increase in barley prices due to the Chinese dropping tariffs probably hurts the chances of that happening, but there is a lot of grain that can be moved by road or rail."
In particular Mr Madden nominated the overland rail link from Crystal Brook in SA's Upper Mid North to Moree as an important freight link.
"That is now proven to work well and there should be good volumes of grain in SA this year."
Mr Madden said he believed there would be solid demand from intensive livestock producers, such as lot-feeders, the chicken and pork sectors for grain however he added there may be less interest from mixed farmers and broadacre livestock producers for product due to the low price of livestock.
"There is a major difference between this drought and then last one in terms of the livestock prices, particularly for sheep, so that may influence how much money they're prepared to spend on feed before they consider destocking."
"However, there is a certain amount of inelastic demand from the intensive guys which is good news for grain growers."
Mr Meyer agreed that the Crystal Brook to Moree line could be an important transport hub this year.
"Suddenly guys are looking at that equation, especially when you think that the wheat that is produced in the north is likely to be prime hard quality and destined for export at around $550/t delivered to a capital city."
Both men highlighted that in spite of the dry there would be local grain for sale to supply end users.
"It is not a total wipeout there are patches to the east of Moree that are not too bad," Mr Madden said.
"Central Queensland is just starting harvest and at present it is coming off as APW with high test weight, some of that may start coming off as AH which will be exported but it will at least take the edge off demand from the Downs," Mr Meyer said.
He also said there would be reasonable old crop supplies from southern NSW.
"Driving around the Riverina there are still quite a few sausage bags of grain, not all of it would be suitable to the lot-feeders due to quality issues associated with the wet harvest but it is out there."
"Due to transport rules it is likely that buyers will target NSW grain first but there will also be product in Victoria if need be, and in the west there will be a tug of war for tonnes between the east coast and China."
After years in the doldrums when Australia had plenty of grain and the rest of the world's supplies were tight, basis has come roaring back, with a strongly positive basis in play at present.
Mr Meyer said recent hot weather in the northern WA wheatbelt had markets spooked, with a big reduction in WA production likely.
Mr Madden said there would also be strong competition for fodder, with normally reliable areas like the Hunter Valley and the Northern Rivers in NSW not having great fodder making seasons meaning fodder users there will be looking elsewhere for their supplies.
"Some may look to bale failing cereal crops, although obviously there is not a lot of biomass in them."
Mr Meyer said there would be less high value feed grain sold to broadacre livestock producers this time around.
"Last time there was a price signal to try and finish livestock, this time, in particular in sheep, the price is so bad I don't think we'll see as many fabas and lupins going out, it will be just maintenance rations to keep them going rather than spending money putting weight on."