Grain and Seed chairman, Ian Morten

Early this year US wheat prices hit an all time high. World grain stocks are at an all time low and in seven of the past nine years the world's consumption has far exceeded the world's supply. In addition, the switching of huge areas of farmland from food to fuel has increased the world's food prices further.

In New Zealand, grain prices have also risen. Biodiesel New Zealand Ltd planned to plant 10,000ha for biofuel production. The Fonterra Factory at Clandeboye reportedly has 93 new suppliers this year and an expected 83 for next year which further reduces the land available for cropping.

Is the lift in the prices for grain and seed enough to make you continue to crop your land? 

If feed wheat prices do not stay at over $500/tonne and barley at over $450 will you stay growing grain and seed crops?  Fertilizer costs are up. Fuel prices are up. Transport costs have gone up, and to top it all off electricity costs have gone up. Consider all of these cost increases and do your gross margins very carefully.

In the Canterbury area spring plantings of grain are reported to be considerable. It is time for us all to remember economics 101 "supply/demand = price".  Too little supply and prices go up but too much supply and prices go down!

My final comments are on biofuels, the political "green energy" that was the solution to our dependence on fossil fuels and one of the cures for global warming. 

In March 2007, the leaders of the European Union, in a package designed to lead the world in the fight against climate change, were committed to deriving 10 percent of all transport fuels from renewable (biofuels) by 2020. This theoretically gave off no more carbon dioxide than was absorbed in their growing. But not so, a succession of studies now show that far from helping CO2 emissions, biofuel production can often give off much more CO2 than they save. According to the University of Minnesota, this release could be "17 to 420 times more CO2" than is saved by the fuels themselves.

A Cornell University study shows that biofuels produced from farm crops such as corn takes 29 percent more energy than is yielded by the fuel itself.  Environmentalists formerly keen on this "green energy" now express horror at the havoc being inflicted on the world's ecosystems, and the clearing of rainforests to grow fuel crops. Growing crops for fuel was supposed to solve global warming. Now, as food prices soar, biofuels stand condemned as a crime against humanity.

North Island – Hew Dalrymple, vice-chairman

• A good dry start to the season and planting is well under way with maize barley and wheat.
• Many farmers are holding off with contract signing as they feel the prices are about $30-40 shy of comparable international prices.
• Some varieties of maize seed are short, which is indicating an increased area to be planted. However, there is a massive shortage of feed supplies in the North Island largely due to last season's drought.

Canterbury – Paul Stackhouse, North Canterbury chairman

• Things are starting to dry out - they have gone from too wet to too dry.
• Spring plantings are happening and a lot of barley is going in.
• Considerations need to be given to the marketing and storage of grain at harvest time so there isn't a surplus of free grain with nowhere to go. This should ensure there are no weak sellers.

Southland – John Gardyne, Southland chairman

• Southland spring sowing is running late due to wet ground conditions.
• Inbetween wet days we are getting much wind.
• Autumn crops have come through winter very well except for very wet areas and some bad grass grub damage in crops following grass.

Pricing – From a New Zealand perspective

The following anecdotal prices have been collected from chairmen around New Zealand. The market is relatively quiet at the moment and there has not been much movement in the prices offered.

World news

Volatile markets - The Wall Street financial crisis is affecting the world's commodity markets. The grain futures were first to feel the effects, with the worst day of trading since the Great Depression. Chicago Board of Trade December '08 futures limit went down on last week, dropping the maximum by US50c/bu to US668c/bu, before rebounding slightly to US680c/bu on October 1.

West Australian harvest - The WA harvest has started. In April forecasts were for a well above average harvest, but then the rain dried up in August leading to some people suggesting the harvest could be as low as 7.5 million tonnes. The current forecasts are for 10-12 million tonnes.

Pressure on crops - The Middle East and Central Asia regions are currently experiencing one of the worst droughts in recent history. Widespread failure of rain-fed grain crops occurred in 2008, as well as considerable declines in irrigated crop area and yield. Food grain production dropped to some of the lowest levels in decades. Thus spurring governments to enforce grain export bans, resulting in abnormally large region-wide grain imports. Should drought continue into the 2009 growing season which begins in October, even greater declines in grain production will occur as planted area for both rain-fed and irrigated crops will be severely restricted.

Other news

MAF arable monitoring report - New Zealand growers are showing their resilience and flexibility despite changing economic conditions, says a report launched by the Ministry of Agriculture and Forestry Monday 6 October. The "Horticulture and Arable Monitoring Report 2008" shows that, despite increasing costs, many growers in the horticulture and arable sectors had an improved financial outcome for the 2008 harvest season. The report finds that growers expect further cost increases in the year ahead, and are seeking to manage this by maximising income through improved yields, quality crops and by more efficient use of inputs. Click here for the full report .

Fertiliser prices - The Ravensdown fertiliser co-operative says there may be some softening in fertiliser prices on the horizon, following months of record highs. The commodities boom has driven up demand and prices for fertiliser. The cost of urea for example, rose from $700 six months ago to more than $1100. But Ravensdown chairman Bill McLeod told this week's annual general meeting that sulphur prices have dropped by $US300 per tonne. He said prices of phosphate rock and urea were also falling.

Fill in the Federated Farmers Grain & Seed storage poll by clicking here. The poll is on the right hand side of the screen.

Federated Farmers Grain and Seed Executive contact details

If you have any questions or issues you would like to discuss, contact the grain and seed representative in your area.

DISCLAIMER

The information contained in this bulletin is of a general nature only. You should seek professional advice before taking any action in relation to matters dealt with in this publication.

For more information, contact Carly Sluys at csluys@fedfarm.org.nz or on 0800 FARMING.