IN SPITE of a rally last week, Australian grain prices have slipped significantly since harvest, with values for cereal grains across both the east and west coasts dropping by up to $80 a tonne since November.
It has had some industry analysts on the east coast scratching their heads, as cattle on feed numbers remain above a million head for the fourth consecutive quarter and the upcoming winter crop prospects already below average in Queensland and northern NSW.
Subdued international values, on the back of improving northern hemisphere crop prospects, are seen as the key driver of the fall, with sufficient grain available in Western Australia to keep Australian prices in some way correlated to the international market.
But although prices have edged lower, the concern over supplies is clearly apparent.
This week, cash prices had monster single day spikes of $10 a tonne on the east coast and up to $13/t for APW wheat in the Adelaide port zone.
Adelaide prices are now at $365/t and Port Kembla values sit at $408/t.
Industry speculation has been that the price gains were a result of a buyer looking to get hold of parcels of grain quickly.
In terms of the falling values, technical factors from within the trade are also having an influence, according to one commentator.
"There is a feeling the trade had an extremely long position, especially in regards to the South Australian crop, where it was paying prices around $US40 a tonne over that paid in Western Australia," said Lloyd George, AgScientia.
"The unwinding of these positions has had a part in the drop in prices through the calendar year, there's the difficulty in finding export markets and the inverse market for the upcoming season that has weighed heavily on prices."
He said the current grain market was difficult to predict.
"It's certainly not a situation we see very often," Mr George said.
"There is grain around, both in Western Australia and even on the east coast, where yields were bad, there was a general consensus there was a little more than expected, all of which has kept a lid on things.
"On the other hand, the summer crop has not amounted to much, there has been poor northern summer rain and the moisture levels are so low in the northern zone that there are already concerns about the upcoming winter crop.
He said most of the grain on the east coast was now in the trade's hands.
"There may be some smaller parcels still with growers, but with the high prices at harvest a lot of grain was sold straight away."
While the domestic market continues to provide strength to prices in Australia, internationally it has been a free-fall for several weeks.
Last week's US Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) report was relatively benign for the wheat sector, with a drop in demand partially offset by a drop in production, primarily on the back of issues in Kazakhstan.
However, in spite of the neutral outlook, US futures exchanges continued to shed value.
The Chicago Board of Trade (CBOT) contract, used as a price signal for lower protein wheat, has been under pressure for weeks now, and continued to fall following the WASDE report.
Kansas City, used for the higher protein wheats, has been stronger over recent weeks, but also fell markedly earlier this week.