Price a concern this harvest begins

25 Oct, 2013 01:00 AM
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WITH harvest beginning to ramp up around WA and forecasts pointing to a bumper crop, the direction of grain prices is becoming a concern.

Profarmer chief analyst Nathan Cattle suspects that wheat prices will be lower than last year, but there were plenty of factors that could push them the other way.

"Grower behaviour is going to have a reasonable influence on prices leading into harvest," Mr Cattle said.

"You've got a reasonable crop over there and once that starts hitting the market at once, the price has the potential to come off.

"Having said that, exporters are going to try to tap into these international markets and there is the potential for those merchants to get caught short on occasion which might provide opportunities for rallies in the market."

Last week Australian wheat prices were impacted by the stronger Australian dollar which may see growers slow their sales program.

Rabobank senior analyst grains and oilseeds Graydon Chong said the effects of the US shutdown had already been felt by the market and that the biggest influence on grain prices at this stage was the exchange rate.

"We've already seen the exchange rate rally significantly," Mr Chong said.

Mr Cattle said the big message for growers at this point in time was to get organised for harvest and give careful consideration to cash flow.

"You don't want your cash flow dictating your marketing," he said.

His advice was to have a certain level of sales in place so that during harvest a grower can step aside from the market if it does come off in a quick fashion.

"If you know you're going to need $200,000 for a machinery repayment, school fees or to pay some overdraft back to the bank in January, then you really should be organising that now and getting some sales into the current market so you've got that cash flow covered," Mr Cattle said.

"Come harvest time you don't want to be making sales because you need to make a repayment in 14 or 30 days."

According to Mr Cattle the key was to avoid being at the "complete whim" of the market, particularly with such a large crop expected.

"Having said that, there are some pretty good underlying supporting influences in the global market at the moment," he said.

"A lot of merchants are going to be pushing grain out of ports and there is potential for them to be short every now and again, in which case they'll be getting the grain directly from growers."

According to the Rabobank October agribusiness report, the ASX Jan wheat contract followed the The Chicago Board of Trade wheat price higher throughout the second half of September, however it still ended the month 3.8 per cent lower.

The decline in Australia wheat prices was largely driven by much needed widespread rainfall.

Rabobank stated that as weather conditions improved, the price spread between the wheat grades had continued to increase.

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