CHICAGO board of trade (CBoT) international wheat futures posted a week-on-week gain last week, reversing the recent downward trend.
International futures markets have been grinding lower as improved weather conditions in the Northern Hemisphere saw some risk premium come out of prices.
A period of favourable weather conditions rightfully gives markets more confidence in production prospects, and logically means any supply shock - whether it be weather-related or other - will need to be greater to push the market in the other direction.
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This supply shock may have eventuated in the form of escalating conflict between Ukraine and Russia last week.
Russia, along with Australia, has been the predominant supplier of grain to the world in recent years, given massive production surpluses and more modest crops in other parts of the world.
Heightened tensions in the war puts the Ukraine grain corridor in doubt, but also may see Russian grain supplies used as political leverage.
The renewed uncertainty saw international grain futures react to the upside.
It remains to be seen if this tension amounts to a material change in grain exports from Ukraine and Russia.
On the local front, prices generally improved across most commodities and grades in most locations.
The Australian market has also seen an increase in activity across the smaller crops, such as oats, lupins, faba beans, chickpeas and lentils, in recent times.
International demand for all Australian grains has been very strong during the past two seasons and has seen our grains trade at historically strong prices through that period.
However, as many growers of the smaller crops will attest, the prices of commodities such as oats and pulses have struggled to perform as strongly as the major crops of wheat, barley and canola.
This has largely been driven by conditions in the container market.
The minor crops and niche grades rely on the availability of containers to reach their offshore markets.
During the height of the COVID-induced supply chain disruptions, container freight rates were at elevated levels and food grade containers were hard to secure here in Australia.
This restricted the volume container exporters could handle and significantly increased the costs to execute any sales, resulting in sporadic demand and reduced relative prices for impacted grains.
In recent times, we have seen container availability become more reliable and freight rates have returned to long-term historical levels.
This allows exporters of small grains to be more active and create demand for those grades which is being reflected in prices.
For more information or to see what values are trading contact Clear Grain Exchange on 1800 000 410 or support@cgx.com.au
