WHEAT prices have been rallying on the back of dry conditions across Australia, United States and the Black Sea region as nervous buyers try to shore up grain tonnes to meet existing contracts.
Last week prices for APW1 wheat nudged $315 per tonne and $330/t for ANW, with the potential for even higher movement this week.
CBH head of trading Trevor Lucas said the dry conditions across WA and South Australia had been the catalyst for price movements over the past month, which was now beginning to be seen in New South Wales and Victoria.
However dry conditions and low wheat planting in United States and searing temperatures in the Black Sea region was making the market nervous.
“We are starting to see conditions around the world providing some momentum to that upward strength,” Mr Lucas said.
“You’ve got the lowest hectares for 100 years being planted in the US, you’ve got reasonably dry conditions in the northern plains of the US so the crop is not finishing well and similarly in Europe and the Black Sea – it is definitely not the year we saw last year where we had record Russian yields of production.
“All these factors means the market is a little bit nervous at the moment and as Australia is one of the three biggest exporters in the world people are starting to stand up and pay attention and traders around the world are really reacting.”
Ten Tigers director Chris Tonkin said local prices for all commodities had moved significantly in recent weeks as buyers tried to shore up tonnages.
“Buyers are trying to stock up so they have tonnes in December, January and February because they are very nervous about supply, particularly with lupins,” Mr Tonkin said.
“Most buyers are in the middle of five-year shipping commitment agreements so there is certainly some who would like to have some tonnes on the books and to buy more so they can ship and fulfill their obligations without having to pay a shipping fine.
“It is amazing how much it has changed in the month of June – you would not have expected it to do what it has done had we had an average season – this is definitely one out of the box in that regard.”
Despite the significant price movement, Mr Lucas said prices weren’t expected to move too much higher thanks to a strong Australian dollar.
“The dollar moved significantly last week to US$0.77 so that will put a bit of a dampener on prices,” he said.
“Wheat prices have moved so that will put more money into the pockets of growers which is positive but that is in the face of a drought so it is a difficult situation for growers as they might want to sell but it is risky.”
MarketAg grain marketing adviser Richard Vincent said grain price moves in local markets have been very positive of late, but unfortunately for some, these moves are for the wrong reason with regards to the season.
“Cereal and oilseed prices have enjoyed higher prices on the back of concerns with the Australian growing season, combined with support from international markets,” Mr Vincent said.
“APW1 wheat has traded $300/t FIS or above in all WA port zones during June, with Kwinana and Geraldton zones now pushing above $320.
“Noodle wheat has also rallied to over $330 FIS with a small premium over milling wheat.
“Canola reached a season high in the mid $560s FIS, while GM canola pushed above $550 for a short while.”
Mr Vincent said the big talking point has been wheat basis.
“Basis has pushed to levels beyond expectations, and well above levels observed in the last couple of years,” he said.
“Some merchants were paying in excess of $70/t above benchmark wheat futures in the last week for new crop wheat.
“This basis figure of $70/t is double the level of previous seasons for this time of year.
“Since the start of seeding, wheat basis has more than tripled as merchant competition heats up to buy a reduced WA crop.
“With the recent rally in wheat futures, the strong basis bodes well for WA growers.”
Mr Lucas said there were still opportunities for growers to make the most of the buoyant pricing.
“Oats for example have moved between $50-70/t in the last month and growers that are sitting on them can take advantage,” he said.
“There are good opportunities for those still sitting on grain but they will make a decision based on production and whether they want to hold on to that for the moment.
“For new season grain there are some areas such as Esperance and Albany and pockets around Australia that can take advantage of the new season prices which are offering pretty good value so I would anticipate growers will continue to sell into that albeit in a careful fashion.”
Contract washouts were beginning to happen in the northern agricultural region as growers faced a below average season.
Mr Tonkin said the company had begun discusions to wash out contracts six weeks ago with poor crop emergence due to below average growing season rainfall.
