Australian sorghum harvest 'heading for 23-year low'


Australia's sorghum harvest - which US officials, citing "near-record temperatures", estimated at a 19-year low - may thanks be poised for further downgrades, in a dynamic which is offering some support for wheat prices.

The US Department of Agriculture on Thursday slashed by 300,000 tonnes to 1.20m tonnes its estimate for sorghum production in 2016-17 by Australia, a key exporter of the grain, citing the setback from "unfavourable seasonal conditions over the past several weeks".

"Near-record temperatures further stressed the crop, which was already struggling from a lack of soil moisture," boding ill for yields for the newly-started harvest, the USDA said.

The conditions have also cut prospects for late-season sowings of the crop, which are now "expected to be minimal".

'Production estimates have plummeted'

Australian sorghum output at 1.20m tonnes would represent the lowest a decline of 41% year on year, and be the smallest harvest since 1997-98.

However, some local commentators believe the crop could be even lower, potentially falling below 1m tonnes for the first time since 1993-94.

Peter McMeekin, origination manager at trading house Nidera Australia, said that the "with the February heat wave and virtually no plant in Central Queensland," besides insect damage in some areas, "production estimates have plummeted to less than 1m tonnes".

Furthermore, the quality of sorghum harvested so far "has been poor".

'Spooked the market'

The dent to crop hopes has "has certainly spooked the northern consumption markets, with rising sorghum prices," Mr McMeekin said.

Sorghum in the Queensland port of Brisbane is achieving as much as Aus$269 a tonne, with crop delivered further north at Beerwah achieving Aus$276 a tonne, on Nidera data.

The increase has also driven "rallies in both wheat and barley", alternative grains for uses such as feed.

Feed grade wheat is selling in Brisbane for Aus$235 a tonne, and feed barley at Aus$203-223 a tonne.

Futures prices strong enough?

The trend appears to have been somewhat reflected in futures markets too, with east coast Australian wheat, which entered this month trading at parity with Kansas City-traded hard red winter wheat, now trading at a premium of more than $3.20 a tonne, May basis.

Against Chicago soft red winter wheat, east coast Australia futures - which closed at Aus$230.00 a tonne on the ASX exchange overnight for May delivery -  have so far this month raised their premium by nearly $3 a tonne, to more than $10.30 a tonne.

However, at Commonwealth Bank of Australia, Tobin Gorey cautioned against expecting the premium to rise much further, against a backdrop of strong competition on world export markets.

"Australian wheat prices are now starting to push up against the top end of a competitive range so we expect rises to slow, or even reverse, from here," Mr Gorey said.

Sorghum gains ground from corn

Meanwhile, prospects for demand for sorghum in the key import market of China have been undermined by a rise in the country's own production prospects, besides lower prices of rival feed grain corn, thanks to government subsidy reforms.

The USDA also on Thursday raised by 500,000 tonnes to an 18-year high of 3.80m tonnes its estimate of China's 2016-17 sorghum output.

The USDA cited an upgrade to its sowings estimate, now seen soaring 32% to 760,000 hectares, reflecting a bigger switch away from corn than had been thought.

"Sorghum has benefited from recent changes in agricultural policies, in particular the removal of corn production subsidies, which resulted in lower corn prices and reduced farmers' profits," the USDA said.

"The major sorghum expansion has been in areas where corn is only marginally suitable, and in regions where sorghum is predominantly irrigated."


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