Rainfall boosts interest in canola plantings as hay demand takes a hit

Rain is beginning to shape new crop prices while hay markets will need to adjust further to the promising start to the growing season.

Falling demand: Continued rain in much of NSW and Victoria has dampened demand for hay. Picture: Andy Rogers

RAINFALL over the past three months shows that NSW and parts of central and eastern Victoria have had an exceptional start to the year.

Accordingly, grain growers are showing strong interest in sowing canola.

Canola prices have been influenced by the US Department of Agriculture report of last week that forecast the area of corn and soyabeans would expand this year.

While that will help oilseed and feed grain supply lines recover from the tight supplies expected later this year, the market was expecting a greater expansion in the area sown to these row crops.

The futures markets in Chicago for corn and soyabean were up last Wednesday. Time will tell if the recent rally in corn prices will boost the area planted.

Compared with last week, new-crop canola prices are up $13 a tonne, with traders bidding $633 port basis Geelong and Melbourne. At this level, canola prices are decile 90 or in the highest 10 per cent of the prices over the past five years.

As the volume of uncommitted canola and canola vessels declines so too are the number of traders bidding for current season’s seed.

Demand for wheat and barley is strongly focused on the frantic shipping programs under way in southeast Australia including those shipping from the three bulk export terminals in Victoria.

To match this aggressive program and as itemised in the graphics, exporters are paying substantial premiums for deliveries direct to the ports.

Compared with the port equivalent of the prices bid for wheat and barley already warehoused in country storages, the direct port bids are $20 a tonne higher with an extra $6 a tonne premium for buyers to have the option to call for delivery to the end of May.

Clearly, these direct port prices are attractive to grain stored on farm and they depend on the availability of road transport to help fill vessels.

Traders report that it is tough to find large numbers of trucks available at the usual rate for this freight task. The supply of trucks can be considered elastic if higher freight rates are paid to attract semi and B-double tippers from other paying work.

The direct delivery program to the ports also puts more logistical strain on the treatment of stored insect pests.

Loads for some shipments are required to be export ready, including a fumigation treatment followed by the correct aeration of fumigants.

While some loads of wheat have been fumigated, exporters have been challenged with high levels of fumigants at port and the corresponding health and safety issues that arise.

Traders are focusing on the shape of new crop grains in the northern hemisphere.

This week, new crop ASX wheat futures have been trading higher at $292 a tonne.

LITTLE HOPE OF RISING FODDER DEMAND

COMMODITY prices for beef and dairy are favourable but with plenty of standing feed and fodder on hand, selling hay remains a significant challenge for growers.

In the southern half, coastal and the northwest areas of NSW, the decile 10 rainfall is indicative of a one in 10 wet start to the year. These conditions favour the early sowing of long season cereals suited to grazing.

This has livestock producers retaining cattle and building herds and has sent the already high Eastern Young Cattle Indicator to a record 896 cents.

The early rain will also boost pastures and limit hay demand.

Further south, the major cropping areas in South Australia and Victoria’s Mallee and Wimmera have had a drier start to the year and are generally drier than this time last year.

The rainfall outlook for eastern Australia, however, is expected to change.

According to the Bureau of Meteorology the chances of NSW receiving median rainfall during April and May is estimated to be between 30 and 40 per cent.

According to the BoM and other weather models monitored by Agriculture Victoria, the rainfall for Victoria during April and May is expected to be neutral to wetter than the median.

Like their counterparts in NSW, Wimmera growers would like to see early rains so they can sow vetch crops.

Vetch hay, heavily leached by 60mm to 80mm of rain, has been selling for $140 a tonne ex Wimmera farm.

These price levels and the large stocks of cereal hay will discourage vetch hay production this spring.

However, vetch will continue to be sown as a brown manure.

Once crops are established in July or August, vetch paddocks are sprayed and incorporated to boost soil nitrogen and carbon.

Although it is possible that vetch crops could be diverted from brown manure to hay if the prices for vetch hay were to improve, the early timing of the spraying is unlikely to favour this change. Vetch hay prices are most likely to strengthen during a dry spring in September and October, well beyond the spraying date for brown manure.

Broadacre croppers who have empty shed space will consider rolling the dice on hay, but many sheds are full of the current season’s hay and some have hay carried over from the 2019-20 season.

Shed space will also be critical for access to the lucrative export hay markets.

Exporters are lowering their tonnage needs for new crop but are favouring those growers with shed capacity.

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