INTERNATIONAL wheat futures have dropped to their lowest levels in a decade, with the Chicago Board of Trade (CBOT) December contract sitting at US399 cents a bushel, after hitting a low of US383c/bu the first time for a decade the quote has dropped below US$4/bu.
A glut of wheat across the globe, combined with technical selling on the prospect of the US raising its interest rates, which correlates with lower grains, have sent markets crashing.
No longer insulated by a declining dollar, Australian wheat futures have also felt the pain, with the ASX east coast wheat values hitting a seasonal low of $232 a tonne this week.
However, Nick Crundall, assistant pool manager at Market Check, said the silver lining was that Australian wheat was now competitive on the world stage.
“US wheat is now the cheapest in the world, and while there is a positive basis between Australian and US wheat, we are finding a home for our wheat at current values, although we are having to look hard for buyers.”
He said the dip in US futures had not been reflected in other key wheat producing areas.
“Russian wheat prices only came back the equivalent of a couple of dollars a tonne following this fall,” he said.
The market now has its eyes on events in Egypt, the world’s largest importer of wheat, where the government this week issued an edict saying it would no longer accept any wheat with a trace of ergot fungus.
“That means wheat that had previously been sold there will now have to find another home and it isn’t that easy to find buyers when there is so much wheat around the globe,” said Tobin Gorey, Commonwealth Bank commodity analyst.
Across the globe, the world is awash in grain.
Last week the International Grains Council increased its global wheat production forecast to a record 743m tonnes, up 1 per cent from last year.
And Mr Crundall said last week’s influential ProFarmer crop tour of the US corn belt had bearish findings for the market.
“They have come in with estimated corn yields of 171bu an acre, slightly below the US Department of Agriculture figures but still very high.”
Locally, most forecasters are predicting the best year since 2011-12, with most estimates between 26mt and 27.5mt.
Mr Gorey said wheat was doing it toughest out of all the major grains.
“There is good demand from the feed sector in corn which provides some level of support, but that is not there in wheat.”
He said there could be further price falls in Australia as the last of the old crop is cleared to free storage prior to this year’s harvest.
Mr Crundall said he expected to see a correction in the market.
“Futures have really fallen out of bed, but you would expect to see some sort of a correction at some stage, particularly once the technical selling stops.”