FEDERATED FARMERS GRAIN AND SEED CHAIRMAN IAN MORTEN

At the present time very little grain has been traded making it difficult to get an accurate picture of prices. Concerns with money supply and turmoil in the financial markets has made buyers weary of stocking up on product. In troubled times cash is king. Keeping an eye on cash flow is more important to a business than holding large stock levels.   Anxious growers look at their calendar and at their silo full of grain and wish they could be rid of it. Significant imports of palm kernel and tapioca from Asia and sorghum, from Australia, are putting further downward price pressure on home grown grains. At this time one needs to show patience.

In the US fear has overrun the commodity futures markets since December. Steve Kay, in his letter from America, says, "I have never seen a time when supply fundamentals meant so little to the futures market. But no futures trader wanted to buy." Prices internationally have been falling, but the market fundamentals have NOT changed. The world has low carry over stock levels of grain and, coupled with annual consumption out stripping annual production, you would expect to see grain prices firm. In one of Malcolm Bartholomaeus' newsletters he notes that southern regions of NSW, SA and Vic are in drought as grain harvested from these areas has high screening and is of lower quality. 

This financial/credit crisis is having a depressing affect on the price of all commodities. This crisis is now a driving force in the market.  You would normally expect the balance between supply and demand to set prices, but in these uncertain times, this does not appear to be occurring. Let me repeat that the fundamentals of the grain markets have not changed. When the financial turmoil stops we should see a return to normal market forces. 

Looking overseas we see oil prices have dropped.  Middle East urea prices fell by US$150-$200 in just one week, with Russia, Ukraine, Libya and Egypt reporting unsold stocks of urea. There has been a dramatic drop in ocean freight rates too.  A slowing of shipping has occurred as the global recession bites and trade has slowed because some banks letters of credit are not being accepted. On the flip side, this drop in freight will help the importers of grain and alternative feeds.

On the local front growers need to look at the price they are selling their straw for. Growers need to take into account the cost of replacing nutrients in the straw that have been lost off farm. This is especially relevant with the high cost of fertilisers. Please do not sell yourself short!

I look on these newsletters as a way to communicate with our members, but this does not have to be the only way. If you have a different point of view or want to keep Federated Farmers updated with what is happening in your area, we do welcome your comments and input.

Lower North Island, Hew Dalrymple

• The market is very quiet.
• Crops in the Manawatu and Rangitikei are doing well due to the timely December rains, but with the late plantings a dry January could be a problem.
• The Hawke's Bay's crops are not looking good. Wheat and Barley are 4 inches high and the crop yields are going to be very depressed.
• In the Waikato there is a shortage of feed. The crop situation is tight and more rain is needed.
• The forecast for the Central North Island and Waikato is for another dry season, which could underpin prices.

South Canterbury, Michael Tayler

• There has been some meaningful rain!! The province received 54mm in the week before Christmas with some areas reporting much more than that.
• Most crops will gain some benefit from this with predicted yields moving from below average to average.

 Southland, John Gardyne

• There have been some good rains during December.
• With the warmer weather the crops are doing well.
• Some of the crops have suffered from the cold and dry weather before December.
• The heavy land crops are doing well; the crops on marginal land aren't doing as well.
• It will depend on how January plays out.

The following anecdotal prices have been collected from our Chairs around New Zealand. 

Please note if the buyers are using import parity prices as an indication of what the grower should be selling their NZ grain at, ask them what the quality parameters of the product are. There have been reports of downgraded Australian grain being imported that will not necessarily be as high quality as the locally grown grain.  Make sure you compare "apples with apples". 

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TRAINING

Essential estate planning tips - Learn how to grow and protect the farm asset in the present, and plan for the ultimate transfer of the farm business and associated assets to the next generation in the future. Federated Farmers of New Zealand and Guardian Trust are holding informative, question and answer style estate planning seminars to provide you with a valuable introduction to the topic from their experienced and knowledgeable estate planning experts. The cost to members is $40. To find out when there is one in your area or to register for a seminar in February or March call 0800 327 646 for time and locations nearest. Read more »

If you have any questions or comments about matters raised in this newsletter, please don't hesitate to contact one of the team. After all, that's what they are there for!

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

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.