Corn futures in the US found some support from talk of higher oil prices in 2018 and slightly lower than expected corn yields in the last of the US corn crop coming off in November. With first notice day looming the trade still have a fair volume of open contracts to play with.
The Chinese price for corn is still firming, this will probably help explain why the Chinese also have a fair level of interest in sorghum out of Australia. January corn futures in China closed at AUD$342 / tonne yesterday. Ocean freight, port charges and other costs would amount to around AUD$70 – $80 to land sorghum in China from a delivered port price. If sorghum was to trade at parity to corn it would signal a delivered port price around AUD$262. This is bang on where we saw local new crop bids on the track Newcastle yesterday. At the moment offers out of the US have sorghum at about US$30 premium over 2YC corn. If this spread was applied to Australian sorghum it may well see NTP values closer to $300 less rail, bang in the middle of my current price range.
The US is expected to sow just 45 million acres of all wheat in 2018, an all time low as far back as records go, which is 1919. The downgrade came on the back of a poor price outlook in 2018 as Russia continues to dominate the world export stage. With cash prices in the US as low as US$128 per tonne it is now costing more to grow wheat than what it is worth in lower yielding areas.
The extra acres are expected to be picked up by soybeans and corn.