Thursday, March 28, 2024

Arable confidence holds up despite challenges

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Milling wheat is out of favour with farmers this coming harvest but there is still confidence in the industry.
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United Wheatgrowers chair Brian Leadley says improved growing techniques and breeding programmes, underpinned with good soil qualities and irrigation, have New Zealand milling wheat quality right up with international standards. 

Milling wheat is out of favour with farmers this coming harvest but there is still confidence in the industry.

The 23% reduction in milling wheat crops this season is the standout of the latest Arable Industry Marketing Initiative (AIMI) report.

“Certainly, the standout is not surprising, but it is disappointing,” United Wheatgrowers chair Brian Leadley said.

“Milling wheat is well back on last year and that is linked to the changes in procurement that have unstabilised farmers’ views.”

But from a wheat industry perspective, Leadley says there’s still confidence in wheat. 

“There’s still confidence in wheat but it’s gone to feed, and that’s good, we have some work to do with the milling wheat industry,” he said.

“We know our quality is stacking up with international standards, the mills are telling us that.

“This comes with improved growing techniques and breeding programmes and is all underpinned with good soil qualities and irrigation.

“What we do have to do is sort out the procurement.”

Leadley says it is too early for a prediction on the upcoming harvest.

“Growth is good now in Canterbury with warmer conditions and the 20mm of rain last week taking the pressure off irrigation,” he said.

“Farmers are confident they are in a good space from a soil moisture point of view, but the costs of increasing inputs are being closely monitored.

“Fertilisers, ag chemicals, fuel and transport are seeing some fairly substantial cost increases and if savings can be found we will be taking them; everywhere we can cut $50-$60 a hectare helps.

“At the moment there is good demand for feed and there is very little feed grain carryover from last season.

“It’s pleasing to see the dairy payout is holding up, we need a strong feed industry.”

The AIMI survey points to tighter grain supplies, with domestic stock constrained and stocks of unsold cereal grains dropping 62% in the past three months, now 54% lower than this time last year.

On-farm storage of sold grain is 20% lower than the same time last year, with total on-farm storage, including both sold and unsold grain, down 31%.

While availability of grain is currently tight, there is an increase of 6600 hectares in total area sown in cereals this season.

With tight supply and demand increases due to both weather and current commodity prices, grain prices are rising across the country, with feed wheat up $24 a tonne to an average $458/t in Canterbury and up $33/t to an average $450/t in Southland. Manawatū has climbed over the $500 mark, sitting on an average $510/t.

With both local prices and imported prices continuing to climb, there is little doubt that prices will remain elevated until the next harvest.

On the global scene, the World Agricultural Supply and Demand Estimates (WASDE) report released this month by the USDA outlines an increase in global wheat prices because of supply reduction.

US wheat supplies are down 8% to 115 million bushels in November due to lower than anticipated imports.

Annual expected domestic demand is up 0.2% to 1.163 million bushels.

US wheat exports are down 1.7% to 860m tonnes.

Projected 2021-22 ending stocks are raised slightly to 583m bushels, up from last month’s forecast, however, still the lowest US ending stocks since 2007-08.

This is reflected globally with world production forecasts lowered as additional decreases in the EU, UK and Uzbekistan are being reported.

Supply constraints and demand increases are driving prices, with the projected US 2021-22 season-average price up at US$6.90/bushel.

This is reflected in current futures prices, with an increase of $21/t for the December Chicago red wheat (SRW) contract and $20/t for the July 2022 SRW contract. 

US wheat prices are now dragging US Corn prices higher, while Australian grain prices keep gaining, with Australian Premium White (APW) up $31/t at last settlement.

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