DESPITE reports that the Australian grain crop has been hit by the heat this season making international news, local prices haven't bounced back to the extent that might normally be expected.
Grain marketers are attributing this to a global oversupply of wheat somewhere in the vicinity of 16 million tonnes and are worried WA prices will need to drop to be competitive on the world stage.
Australian Crop Forecasters chief analyst Hannah Janson estimates about $500 million has been wiped out of Australia's wheat crop potential in the past week as prices sit at about $300 a tonne for APW wheat.
"While uncertainty remains around the Australian wheat crop, we expect to see local premiums supported, and given the recent weather conditions we are unlikely to know the full extent of the damage until headers strike crops," Ms Janson said.
"While local values remain supported, Aussie prices will still be influenced by offshore values, and the surplus of grain production globally this season continues to weigh in on futures values."
Ms Janson said there were "pockets of support" for Australian growers, but as the market traders around the world know there's a surplus of wheat, she doesn't expect prices to increase dramatically at this stage.
Plum Grove senior commodity trader Tony Smith said WA growers were lucky to see the prices where they are and could thank the weaker Australian dollar against a strong US dollar.
But this came with concern in an oversupplied market and Australia's usual buyers looking for cheaper alternative origins such as the Black Sea, he said.
"The strength in the US dollar has meant that the Aussie dollar has collapsed and that has kept the prices for harvest pretty good," he said.
"But it has meant for people like Malaysia and Indonesia, their ability to buy grain in US dollars has become a lot more expensive and their economies and demand are starting to stall as well.
"We've got no growth in Asia and we've lost a big chunk of our Middle East and African demand. We just can't find homes for our wheat.
"It gets back to the fact that the Aussie dollar, while it has bounced over the last two to three days, is down below 70 cents.
"So for a lot of farmers the price is still $300/t so it's no different to last year in their eyes. The currency has masked it all."
Mr Smith said he held concerns for prices bottoming out if growers were aggressive sellers come harvest.
"If they decide they all just want to sell it, we're going to see significant pressure on the market as there's too much grain to be sold and the trader doesn't want to be left with 6-7mt at the end of the year," he said.
"Whereas, if the farmer is prepared to hold onto it for a while, which is obviously quite risky, then we might not see that much harvest pressure.
"As you know everyone has been talking about El Nino, which never really happened until September, a lot of farmers could be sitting there going, 'El Nino might be here for the next 12 months and it'll be a real problem in terms of Australian production next year so maybe I'll sit on some grain for insurance'.
"As long as they're not desperate sellers come harvest time then I think prices will stay reasonably supported.
"It'll really be driven by prices. If the Aussie dollar comes back and we're at $300/tonne then they will sell the lot.
"I think the Aussie dollar will be one of the major drivers come harvest - if it's at 75 cents growers can expect pretty low prices, but at 69 cents I think prices will be okay."
Emerald Grain WA general manager Dick McCagh concurred the $300/t mark was a common selling point for growers and this could backfire.
"The traders are cautious," he said.
"The grower wants to see the $300/t we have right now and then he'll sell a heap of grain.
"But unfortunately that's not going to happen for the whole crop because at this stage the trade can't sell it on as the equity isn't there in the world market, our prices are too high.
"Traders are covering their short positions for their contracts going forward and only buying what they need to fill their shipping schedule.
"If the world view was stronger you could probably see the WA crop getting better prices, but even at 13.5mt it's a fair sized crop out of WA, it's not as though we're going back to 10 or 11.
"I think when harvest comes we may see that price drop away."
In its monthly report, the US Department of Agriculture (USDA) indicated global production was up and increased Australian production to 27mt, but local traders believe this was done before the figures behind heat induced yield loss were released.
Ms Janson said the market would treat these figures with caution, estimating 24.3mt for Australia and 14.1mt for WA.
Mr Smith said WA was still to have a "decent crop" despite the affect of heat and frost.
He predicted a record carry over of 2015-16 grain this season into next season as a result.
"There's some people out there calling some pretty low production numbers, but I think what those people are missing is that originally people were saying it was a 25mt crop for Australia and if we'd actually had anything near a normal September we would've had a 28mt crop," he said.
"So really this damage has taken us from 28mt back down to 25mt in our view."
Bunge WA regional manager Christopher Tyson said the more technical market of late had rebounded to the crop estimate drop in WA and Australia, but the surplus has softened this.
He said the focus had been on wheat in recent times and barley prices had increased in response.
This could continue he predicted, saying "barley in general there's probably issues with quality and an increase in screenings".
"Nobody has been focused on barley as the prices had been so good and had come back so much," he said.
"Everyone saw wheat around $300 and paid attention there and as a result, barley has gone up around $15 in the past two weeks.
"It's naturally pushed up to get people to sell."
While it sits at $247/t today, Mr Tyson said there was a high of $250 last week.
Mr Tyson said the crop production estimate for WA and in turn any response in prices would be determined in the coming two weeks as the crops finished off and grain finished developing.
However, he said the true test would be when the headers are out working and the yields and quality became apparent.
At the start of the season, oats became a hot topic in WA as growers moved to take advantage of high prices and total area planted increased by around 30 per cent on normal.
CBH general manager marketing and trading Jason Craig said oats were now the topic of focus but no longer for the positive prices.
"While expectations have been of a very strong production year, the dry is now seeing a portion of this crop cut for hay as these later crops have been materially affected," he said.
"This will certainly be a very interesting year to watch how many tonnes are produced for grain after a long dry spell as we have experienced."
He said the spread between genetically modified (GM) and non-GM canola would affect pricing for these growers.
"GM to date has been lacklustre with only non-GM demand being evident to date," Mr Craig said.
"When we see demand for non-GM there is potential for this to be reflected."
Mr Craig said the majority of GM canola would go to China, Japan, Pakistan and the Middle East where WA was competing against Canada and the Black Sea.
Australia almost exclusively supplied its non-GM canola to Europe, he said, and was solely competing with European domestic supplies, which put us in a stronger position with less competitors.