As well as the domestic harvest, it’s expected that the high level of imports from 2014 will continue in 2015. In the past Canterbury feed grain had been priced low enough to be delivered to the North Island at a price similar to what a North Island feed mill would pay for imports from Australia. But with Canterbury’s domestic demand in the 2013-14 dairy season sufficient to consume all its production, prices rose to import parity for Australian imports direct to Canterbury. That meant almost all North Island demand had to be met by imports, and imports of wheat and barley for the first three quarters reached record levels, 46% higher than 2013. This is likely to continue unless Canterbury prices sink low enough to be competitive into the North Island again. A large proportion of mills in the North Island will already have committed to imports in 2015.
On the demand side there are big reductions expected. Already the decline in demand from the dairy industry has meant a slide of $25-$30/tonne in feed wheat and barley. Average contract prices for the 2015 harvest are sitting another $30-$35/t lower at $390/t for feed wheat and $380/t for feed barley. Though this might mean that some local buyers will pick up some cheap grain that could spur sales, at the moment this price won’t get grain into the North Island, which will leave a surplus of available grain in Canterbury.
There will be many different influences on demand next year, and it’s likely that with prices slipping piggeries will start increasing purchases of domestic grain. With indications that domestic prices in Canterbury will be below import parity, it’s likely that some of the users who switched to imports in 2014 will come back to domestic grain. The weather can also be a major influence on grain demand, and a dry summer could mean more supplementary feeding too.
In 2012 and 2013 growers showed a clear willingness to hold on to grain, rather than sell at less than their expectations, which could mean that despite surplus production, there might not be an abundance of cheap grain available.
‘In the past Canterbury feed grain had been priced low enough to be delivered to the North Island at a price similar to what a North Island feed mill would pay for imports from Australia.’
In the AIMI October surveys in 2012 and 2013 there were unsold feed wheat and barley supplies of 141,000t and 85,000t, compared with just 48,000t in 2014. In 2012 there was a large carry-over of feed grain into the new season but a large increase in mid-year demand, because of the increased forecast for the 2013-14 dairy season, meant that nearly all the 85,000t in 2013 was gone by harvest 2014. This means that in 2015, growers may be happy to wait on low prices in the hope of greater demand in late 2015 and the biggest influence on prices for spring will be the outlook for the 2015-16 milk price.
Ivan Luketina is an AgriHQ grain analyst.
