The wheat market
AFTER months of being dragged up due to problems with the US corn crop, wheat is emerging as a story in its own right for international grain buyers.
For Australian growers, there are key factors internationally and domestically keeping prices well above $A300/t.
Firstly, a dearth of Russian exports will mean key importers through the Middle East will have to look initially to Europe and then perhaps further on to meet their demand.
CBH senior wheat trader Scott Haughton said while the Russian government was not rationing supply through an export ban, the market was essentially doing the same thing by raising the price of Russian grain.
He said he expected Russian exports to dry up after October.
“It’s pretty hard to get a price from Russia beyond the end of October.
“This will mean Europe will come into play as an exporter and the feeling of the market is that the balance sheet for wheat stocks there is tight as well.”
If European supplies run short, he said importers would have to look at relatively expensive US wheat as an option.
Bunge Australia general manager Chris Aucote said big purchases recently by major buyers such as Egypt’s single desk importer the General Authority for Supply Commodities (GASC) said grain buyers did not feel there was much scope for prices to drop prior to the next northern hemisphere crop coming on line.
Mr Haughton said the industry would closely monitor big tenders coming up in the next fortnight out of the Middle East to get a feel for what buyers were doing and where supply was coming from.
On a domestic front, ongoing uncertainty about the national crop is keeping basis up.
In spite of near record US prices, Mr Haughton estimated basis was only $3-5/t below the equivalent US values.
The focus has switched from Western Australia to South Australia, which is now in dire need of rain.
Rain is forecast in northern NSW and southern Queensland this week which will go towards locking in yield, following a run of unseasonably warm spring weather.
In the south-east of the country crops still look good, but producers are warning there is no subsoil moisture and yield could be cut dramatically if there is a hot spell.
Both Mr Aucote and Mr Haughton said the recent USDA estimate of a 26mt Australian crop was unrealistic, saying the ABARES figure of 22.5mt was closer to mark, although even this may be on the high side if there is not rain in dry areas in the next three weeks.
“There’s certainly a bit of a risk premium in the local market at present,” Mr Aucote said.
This week, the corn complex has been under solid pressure, with US farmers taking advantage of the high prices and selling their crop, pushing prices down.
Mr Haughton said wheat was running its own race for now.
“With the uncertainty here, a lack of northern hemisphere wheat and the Argentineans focusing on corn and soybeans, there won’t be a lot of wheat about until the next northern hemisphere crop is ready.
“Corn may bridge the gap in the next month once the American harvest pressure is off, but there’s definitely good demand now for wheat in its own right.”