Domestic market continues softening

By Nick Hanson

South Island grains prices have continued to soften since August as diverging international and domestic fundamentals compete to set a market.

The last NZX Profarmer report put Canterbury feed wheat at an average bid price of $366 per metric tonne, including delivery to nearest store or mill, down from $371 just two weeks prior. This represents a moderate softening, but by no means equates to the crash some might have predicted after a bumper harvest produced an ample supply of all major grains. However, the report says growers will be wary of slow demand from the dairy sector.

This softening is somewhat at odds with fundamentals internationally. The effects from the crippling United States drought on international grain prices have been well publicised, but supply concerns, particularly by wheat and corn traders, continue to support historic highs on the benchmark Chicago Board of Exchange. The latest values for wheat contracts in Chicago have some contracts equating to more than NZ$400 per metric tonne.

Unfavourable weather has also led to supply issues in Europe's Black Sea region. Ukraine has curbed exports to ensure sufficient local supply and there is speculation that Russia, the world's third largest exporter, will also run out of surplus wheat.

New Zealand growers are used to competitively-priced Australian wheat coming into the North Island pig and poultry markets. Frustratingly, while the international rally has increased imported wheat prices, local growers have not seen a corresponding lift in the last two months. This is reportedly due to a perceived domestic oversupply and Australian sorghum imports. Growers hope for a lift in interest from South Island dairy farmers and alignment with global prices to sell any remaining crops.

In addition to finding a home for unsold grain, Federated Farmers North Canterbury Grain spokesperson Murray Rowlands has also emphasised the need for growers with contracted grain still in storage awaiting delivery to be vigilant.

"It's important to keep in contact with the merchant who has bought your contracted grain," Rowlands says. "A downside of the good growing season has been that deliveries have been slow and it pays to be in front of the buyer rather than waiting until January and running the risk that a delivery won't be available when you need the space for the new harvest."

Mr Rowlands said growers wanting to confidentially discuss their situation, should call Federated Farmers on 0800 327 646.

- Hamilton News

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