Bumper crops hit growers

Bumper harvests around the world mean another year of low returns for New Zealand grain growers, market commentators say.

High global grain stocks were putting pressure on prices, said Rabobank research analyst Emma Higgins. Australia’s harvest was likely to yield a record 46.1 million tonnes, mainly barley, grain sorghum, maize, oats, triticale and wheat. The Black Sea region, including Russia, was also producing a big wheat crop.

Despite low global prices and high stocks, United States growers were going against economic logic to again plant record crops.

This was because of government policies, with 40 per cent of the US corn crop mandated for ethanol biofuel production, perpetuating the high-production, low-price cycle, she told a grains forum organised by the New Zealand Grain and Seed Trade Association.

As grain was usually traded in US dollars, strengthening of this currency was impacting on competitiveness and production. For example, as the Russian ruble had dropped 50 per cent since 2014, growers there were planting more as export returns had skyrocketed against the US dollar.

Sea freight was also historically cheap, reducing the cost of imports, said Higgins.

NZX Agri analyst Amy van Ossenbruggen said that between the 2015 and 2017 harvests, expected domestic hectares planted were down 4 per cent for feed wheat, 41 per cent for feed barley and 38 per cent for maize.

‘‘As there are few alternative cropping options, we may see more spring barley in the ground when the next figures are released.’’

Dairy commodity prices had started to recover, which was positive for the domestic feed grain market, with Agri HQ picking a 2016-17 forecast milk price of $5.70 a kilogram of milksolids.

‘‘That is what the futures market is telling us, but it is still early in the season.

Usually there was a $100 a tonne differential between imported palm kernel expeller and feed barley, but prices had converged and were about $240/t for palm kernel landed in Auckland and $260/t for feed barley.

She expected some movement away from palm kernel with Landcorp stopping its use on its dairy farms from June 2017 and Fonterra recommending that farmers limit palm kernel to a maximum of 3kg per cow per day.

The latest Arable Industry Marketing Initiative (AIMI) cereal crop survey showed fears of a domestic grain stockpile were unfounded, with larger than expected volumes of grain sold.