Changes to wheat procurement contracts has led to a 27% reduction in milling wheat sown for the 2022 harvest.
In the July Arable Industry Marketing Initiative (AIMI) New Zealand survey of cereal areas and volumes it is clear growers are unhappy with contracts introduced over the past year.
There are also reports of milling wheat being sown, but growers are holding back on signing contracts before harvest, when feed wheat may provide a better return.
From the flour mills, there are reports that Kiwi growers are getting things right, when it comes to growing top quality milling wheat.
This is a result of breeding and management resulting in consistent results, compared to Australian product, which has been reported as not having such consistent results.
Another significant insight in the report is that more growers than normal are undecided about their sowing intentions for spring.
Federated Farmers grains vice chairman Brian Leadley says there are reasonable options looming that farmers are considering for spring planting.
These include competition for vegetable brassicas, peas, and land for ryegrass and other herbage seeds.
“Farmers are weighing up options and looking at gross margins on spring options, that while the contracts are not out yet, are potentially looking to be good options.”
Leadley says it’s not just the procurement and contract pricing that has growers shying away from milling wheat.
“As milling wheat seeps into confusion and the procurement challenges impact on pricing contracts, increased cost of production such as fertiliser is a big factor too when doing the sums on gross margins,” he says.
Global production has been under pressure with floods and heatwaves and how that plays out for NZ is also a factor.
“We are potentially looking at a positive for NZ from the global climatic situation in terms of viable options for spring plantings and some farmers are holding off on decisions on those last few paddocks meantime.”
The AIMI cereal survey takes respondent’s data and scales this information up to the national level, to form an idea of the local grain market.
This data is compared to the data from the equivalent survey the year prior.
Key highlights in July report final 2021 harvest data showing yields were down by 3% over all cereal crops compared to last season, the net result being a 6% decrease in total tonnage compared to last season.
Unsold stocks of feed wheat are down 36,500 tonnes compared to this time last year, and unsold feed barley stocks are down 41,200t on last year, but unsold stocks of milling oats are up on last year.
Sowings and intentions for milling wheat are down 27% on last season, while feed wheat is up 14%.
Sowings and intentions for malting barley are down 13%, feed barley is up 5%, milling oats up 10% and feed oats down 13%.
The report highlights that demand for feed wheat and barley remains high, with many growers reporting empty silos.
This factor is creating an expectation that prices will stay higher for longer.
Of note though is the damage caused by the Canterbury flooding and the expectation that this will change the dynamic of the market come harvest time.
There has been uncertainty around the actual damage as some growers wait to see if a replant is required.
Dairy farm demand continues to drive the feed wheat and barley market, with prices buoyant into winter.
This strong demand has resulted in more area being sown in feed wheat and barley, both winter and spring intentions.
Over the two-year period 2020-2022 harvest area for feed wheat is predicted to increase by 10% and the harvest area for feed barley decrease by 3%.
The harvest area for malting barley is predicted to decrease by 47% while milling oats faces a 37% increase and feed oats a of 42% increase.
