AFTER a year where Australian wheat values have consistently been above international prices, the recent sharp decline in the Aussie dollar and increase in US futures has one analyst questioning whether Australian wheat is now too cheap.
Tom Basnett, Market Check, said Australian growers had not seen the benefit of the falling dollar.
“As a rule of thumb, every one cent fall in the Australian dollar would normally equal a $3 a tonne rise in our wheat prices,” he said.
“Given that the Australian dollar has fallen 6 cents in recent weeks, and the US dollar international price has risen as well, prices here would ordinarily be up $15 to $20/t.”
Mr Basnett said harvest selling pressure here - with prices sitting at levels where growers are comfortable to sell, especially for higher protein lines - has meant the full upside has not been passed on to growers.
However, he said competition between domestic users and exporters would mean pressure would build once again.
“Something has to give at some stage, the exporters need to export and the domestic industry has its needs.
“Either there is a fall in offshore prices or some rationing begins to occur. There was a very low carry-out so domestic supplies could get very tight next year.”
Andrew Weidemann, Grain Producers Australia (GPA) chairman said growers had been happy to clear higher protein lines of wheat.
“There has been good interest in high protein lines and at relatively high prices, farmers have been happy enough to sell those stocks and perhaps store their lower quality grain to market into the new year.”
Peter Woods, Avant Agri principal, said there would still be a lot of grain to be sold into the new year.
“Farmers have sold enough to meet their cash flow requirements and they may sit back on some grain waiting for a higher price.”
He said Avant Agri had been steadily accumulating grain into its pools.
“Growers are looking to participate in any upside in the new year while protecting themselves on the downside.”
Mr Woods said most interest in the pools was for middle range milling wheat.
“The H1 and equivalents are generally sold straight away, the price was fairly good for high protein lines.”
Mr Basnett said at the beginning of harvest, APW1 in NSW was $80/t above the international benchmark Chicago Board of Trade wheat - but was now only $40/t above Chicago.
“Early during harvest wheat from eastern Australia was uncompetitive in the export market, however, at the current premium, we would expect there to be export demand for wheat from eastern Australia, particularly grades with higher protein.”
Mr Basnett said growers could look at hedging options rather than direct selling to participate in any potential rally in basis.
In terms of the all-important summer crop, which will play a key role in determining feed grain availability into 2015, Mr Basnett said while recent storm activity across Queensland and northern NSW had been slightly disappointing, the short-term outlook remained promising.
“We are looking at probably a below-average crop, but we think the incentive is certainly there to plant.
"So with some initial rain, albeit not as much as growers want, we think there will certainly be some plantings,” he said.
International wheat prices fell sharply on Wednesday night in reaction to bearish news from North America. Australian values were also back, but not by the full amount.