THE RED hot basis in the northern cropping zone has fallen in recent weeks as the industry factors in a potential summer crop to alleviate the current tightness in feed grain.
As of last week, prices in the Brisbane and Newcastle port zones were trading at premiums of between $105-115 a tonne over comparable futures price on the Chicago Board of Trade (CBOT), having peaked at around $140/t.
Malcolm Bartholomaeus, Bartholomaeus Consulting, said this figure could be slightly higher than true international parity.
“Chicago is currently trading at a slight discount to the world market, which is being pushed by the prices Russia is receiving for its wheat into the Middle East,” he said.
“Russia has a relatively strong currency at present and it is keeping their export prices up, allowing other exporters to be competitive.”
Cheryl Kalisch Gordon, Rabobank senior grains analyst, said while basis values had fallen away slightly they were still at historically high levels.
Moving forward, while she said there could be some further pressure on basis, she felt it would remain strong until new stocks become available.
“There is reduced supply across the board and that is still the major factor, in spite of the improvement in terms of rainfall in the past month,” Dr Kalisch Gordon said.
“However, the rain does change things on a number of fronts, firstly it will help winter crop in some areas where crops are still in grain fill mode.
“Secondly, we will see increased pasture growth in places like New England and that will keep livestock off grain for longer, reducing demand, you might not need the cattle to be moving into a grain fed situation so soon, there will be more cattle on grass.
“Lastly, as has been well documented, the soil moisture profile is being filled in, especially in southern Queensland and northern NSW.
“In some areas it will mean people will plant virtually straight away, while in other areas, farmers will delay planting until mid-December so they avoid the sorghum flowering in the full heat of summer.”
Dr Kalisch Gordon said with abandoned winter crop and fallow from area not planted this autumn, she expected a good plant.
She said soil moisture conservation programs mean yields could be higher than average given normal seasonal conditions.
“There will be good plantings this year on long fallow where you would hope for better yields.”
Peter McMeekin, Nidera Australia, noted sorghum values mapped against white grains, had dipped as the industry became more certain of a summer crop plant.
Currently, values for sorghum are around $60 a tonne less than for feed wheat, after earlier in the year having a rare premium over wheat.
Dr Kalisch Gordon said in spite of the grain shortages in the north there were still reasonable stocks in the south which would keep a lid on the overall upside in the market.
“We’ve already seen grain come in from significant distances to the south at times during the year and this will also keep the northern basis in check.”
Dr Kalisch Gordon said leading into the 2017-18 harvest the industry was still coming to terms with the amount of uncommitted old crop, especially stocks stored on-farm.
“Anecdotally there are still a lot of full grain bags out there, but the question is how much is already committed.”
She said she expected the livestock sector to continue to be willing buyers of grain.
“The margins are still there for people to keep turning off livestock.”