As we crossed the years half way mark, markets contained a level of uncertainty due to the lack of an Autumn break which resulted in delayed crop establishment.
Confidence in the 2026 season returned (albeit with crops around 6 weeks from where they should be) due to a ‘better late than never’ soak. An enormous amount of fibrous feed found its way onto end users farms and continues to do so with the demand for roughage still high. A broad alternate suite of raw materials has been utilised in combating the need for sustenance while overcoming logistical challenges in the process.
Anytime there is a situation of abnormal demand or supply, the market can be erratic in pricing and for a broad range of end users, navigating various markets can be a challenge in itself.
Grain markets eased across the July period with good follow up rain being a prime driver. More confidence around growing conditions was subsequently reflected in both new and old crop pricing. Essentially, when new crop values are trading at parity or around the values of old crop, the market is inadvertently expressing more confidence in the current supply outlook. The market move however is again a sentiment on confidence but the fibrous demand still exists as a real problem for an industry that is working hard to keep supply in the pipeline. During a drought, Australian farmers face major challenges securing feed for their animals due to reduced pasture growth and lower availability of hay and grain. To manage this, they use a variety of strategies to source and supplement feed. Specially formulated drought pellets and mash feed can provide balanced nutrition, but Farmers have also fed their animals byproducts like cottonseed, almond hulls, palm kernel meal, brewers grain and more which offer a component of a balanced diet.
Export parity is essentially the value in which an exporter can engage an overseas buyer. In Australia, local buyers such as feed mills, flour mills, feedlots, etc have to compete with overseas buyers. Local buyers usually need to pay at levels better than the export parity price particularly due to restrictions around importing of foreign grains, even though import parity values might be below export parity levels. This can occur due to different origins producing different grain qualities in different production periods and in different geographical locations that work better to certain destinations than other origins. Ultimately, Australia’s domestic grain demand is satisfied by what is grown in Australia. In order for the domestic consumer to keep that grain here and not be exported, the local bid level must be more attractive to the seller to ensure supply. That price point (being determined by what the foreign buyer is willing to pay for it) is very much dependent on the global supply and demand balance. That is, if global supply is constrained versus global demand the price is elevated which will directly affect Australian consumers due to stronger international bids. As regional Victoria this year transitioned into drought conditions, global grain supply was ample which resulted in international futures exchanges trading grains within the lower historical price ranges. It’s cold comfort for farmers having to procure grains out of necessity and outside of their normal procurement program each week to feed animals; but had there been a greater imbalance of global supply versus demand, export parity levels could have been significantly higher, quite conceivably by more than $100 per tonne as global destinations try to outbid each other to secure supply.
Various crop forecasting outlets are suggesting light at the end of the tunnel with Victoria pointing to potentially an average crop after a tumultuous start. But it’s important to note the local roughage pipeline has been depleted and the pastures that will replenish these shortages are playing catch up. A total ration solution for stock can require a vast array of raw materials and overcoming of logistical challenges.
As we move closer to Spring we are ever reliant on conditions that hopefully won’t inflict any further growing penalties, but instead give farmers the opportunity to maximise the crop and pasture potential.
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Author
Justin Fay
Commodity Manager
