Growers achieving price targets but Aussie grain still cheap

Last week the highest amount of grain traded ever on Clear Grain Exchange (CGX) in a single day.

On Wednesday 72,699t traded through the exchange as grain values lifted to levels growers were targeting. More than 130,000t traded on CGX over the week.

The small milestone is reflective of more growers feeling comfortable to offer their grain at the price they want to all buyers on an independent and secure exchange.

26 different buyers purchased grain through CGX on the record day, and 32 buyers purchased grain through the week. Plus, there were many more buyers searching for grain on offer.

The total tonnes traded equate to nearly $39 million which will all be settled securely, meaning growers retain title of their grain until they’re paid within seven business days.

Hence it was a nice outcome for many growers and indicates an underlying recognition that there can be a better way to sell grain. The aim is to encourage a more efficient market with as many buyers as possible participating to try and buy grain from growers.

The result is often growers are achieving better value for their grain than is being advertised to them through indicative bids.

So what drove the rally and what does it mean for Australian grain prices going forward?

The good news for growers is recent improvements in grain prices are being driven by a lift in international values. This is good because it means Australian grain remains relatively cheap versus our major export competitors, and so Australian grain is in demand!

The table shows indicative wheat and barley values as at the end of last week in US$ terms on a Free on Board (FOB) basis ex WA and Eastern Australia versus our major competitor origins of Black Sea, Argentina and US Pacific North West. The table then provides a comparison of values from those origins delivered to the major importers on a Cost and Freight (CNF) basis.

You can see both wheat and barley out of Australia remains the most competitive into the major consumption areas of Asia and the Middle East for February 2021 delivery compared to our competitors.

Eastern Australia is the cheapest as the supply chain there struggles to handle the big crop. However, WA remains well priced into all major destinations against our nearest competitor for wheat (the US), and our nearest competitor for barley (the Black Sea).

Not surprisingly we remain very competitive into China on barley if there were no tariffs.

There are plenty of buyers interested in buying your grain. Remember they can only buy and execute a certain amount at a time. Hence if growers sell too quickly, this will keep a weight on Aussie grower prices relative to our international competitors.

A slower selling pace from Australian growers will help to underpin prices. Australian growers should know that your behaviour is having a large impact on the value you're receiving at the farm gate.

Indicators are pointing towards a strong demand profile for Australian grain. Make sure you have your grain on offer at the price you want so all buyers can see it and try to buy it.

For more information please contact Clear Grain Exchange on 1800 000 410 or support@cleargrain.com.au