Big gains for Australian grain

17 Dec, 2014 01:00 AM
Comments
11
 
The fall in the dollar meant Aussie growers were insulated against a price fall

IN spite of a lack of fundamental news, grain prices have rallied sharply over the past week.

Australian wheat prices are now in excess of $300 a tonne port in many regions for APW grade grain.

A depreciating dollar is having a massive impact, but international futures in key commodities such as wheat, corn and canola are now at their highest levels since the Ukrainian crisis sent markets spiralling at the end of May.

Forward contract prices in May were around $310-$320, with an Aussie dollar of US93 cents, compared to US82c now.

Once again, it is geopolitical concerns in the Former Soviet Union that is weighing heavily on investors’ minds.

The market has been watching Russia closely, looking for clues as to whether the Russian government will slap a ban on exports to shore up domestic supplies after a feverish export program in the second half of this year.

Publicly, the Russian government has said it is considering all options in order to protect domestic supplies and hose down the possibility of food price increases.

Dollar dip impacts

Russia aside, the declining Australian dollar is the biggest news for the local grain trade.

The dollar briefly dipped below levels not seen since 2010 late last week and remains at US82c.

Every cent in currency fluctuations equates to a change in wheat prices of $3.31/t, so the fall of the dollar in the second half of this year has allowed Australian grain to become more competitive on the world stage.

Lachie Stevens, Lachstock Consulting, said the weakening Australian dollar had pushed the market along over the past month.

“There’s been quite a bit of harvest selling at these values.”

And he added the support for the market was transferring across to 2015.

“Australian Stock Exchange grain futures for 2015 are extremely strong this far out.

“The implied basis on those prices may be a little softer but it is still strong, its still historically a good number.”

At present, he said the Australian market was focusing on barley.

“There is a good amount of barley trade happening at present.”

Duncan Whittle, senior grain trader with Agrex, said even though the strong Australian basis was being eroded, the fall in the dollar meant Aussie growers were insulated against a price fall.

“It’s been a major factor in grain prices over the past month.”

In terms of the Russian situation, Mr Whittle said the market was taking the potential impact seriously.

“At present, the talk out of the Russian government means the market is taking the possibility of restriction to exports seriously.”

Mr Whittle said farmers had generally been happy with the prices and had been selling.

“We are hearing Western Australia is very heavily sold, with a bit less done in South Australia and the east coast.

“However, grain hitting the market is being snapped up quickly, indicating there has been a fair bit of selling already.”

Brett Hosking, Victorian Farmers Federation grains group president, said many of his members had already sold their grain.

“Prices have been pretty good apart from canola and people have been happy enough to sell at these values," he said.

“There is definitely still some grain on-farm, but a lot of it has already been sold.”

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FarmOnline
Gregor Heard

Gregor Heard

is the national grains writer for Fairfax Agricultural Media
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READER COMMENTS

Jock Munro
17/12/2014 3:50:48 AM

Brett Hosking says it all - most of the grain has been sold. Pity growers were robbed of their marketing arrangements - not only would they have picked some of the gains in the market post harvest but AWB Ltd would have building a pool all year and adding futures premiums to the value of the crop.
Mark Hoskinson
17/12/2014 5:57:48 AM

Jock, no one has mentioned the huge losses this year due to no more Golden rewards. Based on this years results and off the old matrix I have lost over $20 per tonne as well as the rail freight going up $20 since deregulation. A lot of people have short memories but we continue to lose out especially with the loss of the Industry good functions. Put it all together and no wonder growers are finding it hard to make ends meet. The latest good news is fertilizer prices are on the rise. NOT. The Libs need to have a good look at themselves for supporting the deregulation of the wheat industry.
LTF
17/12/2014 5:21:19 PM

Current wheat bids in Australia are already quoted by independent market experts writing in this paper as undervaluing the true value of our wheat. This is supported by other quotations out of USA where their export bids for equivalent grades of wheat have been well above those in Australia. It is so easy for farmers who have little or no international market intel and who are at the mercy of mega trading companies, to be suckered into thinking they are getting the best deal going when they are actually getting below full value.
Mark Hoskinson
18/12/2014 7:09:02 AM

LTF, all of the profit we used to receive is now going to the Trade and we are missing the bonus of the Industry good function and the economy of scale the SD provided. The mega merchants are loving this windfall!
Deregul8
18/12/2014 7:27:48 AM

I know one thing the merchants do do and that is have 'do not trade with' lists and growers who name themselves and regularly spruik misinformation on blogs like this one and in the public domain, will invariably find that there are some marketing opportunities that are closed to them. Just ask Jock about that one?
Mark
18/12/2014 1:04:45 PM

Do us all a favour D8 and enlighten us to what is not correct and for God's sake stop being such a pussy hiding behind your made-up name. Only cowards hide and throw rocks like little children. You make yourself a target by your own action old mate. In this new world order of grain marketing, most of the time we don't know who is doing the selling or the buying so quit the scare mongering.
argis
18/12/2014 1:21:41 PM

What you are suggesting Deregular is that grain traders manipulate their buying on the basis of whether sellers say nice things about them or negative things about traders. On that basis it suggests you are being paid off to be biased in their favour? So we can't take anything you say to have credibility.
jed
18/12/2014 5:02:40 PM

More likely D8 is a trader and is trying to shut us down from telling it how it is by trying to scare us by telling us the big bad traders don't like people talking about them and will black ban anyone that speaks out. Bloody great stuff !!! Goes to show what we have been delivered by deregulation openly admitted by the trade's greatest stalwart. We are now being manipulated by BIG BROTHER! We should not put the local Domestic buyer in the same slot as the big corporates as they are trying to survive in this new Dog eat Dog Wheat Industry which growers are the poor white collies.
Jock Munro
18/12/2014 5:45:35 PM

Thankyou deregular for your kind words. A threat is a threat and it won't be the first time that individuals have been targeted by corporate interests. No doubt the media, corporate watchdogs and politicians will take an interest in any perceived misuse of market power and position.
X Ag Socialis
18/12/2014 8:20:13 PM

I see you guys still believe D8 is a West Australian farmer, he is not, D8 is a X PGA staff member with political ambitions.
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