WHILE the falling Australian dollar helped shield local producers from weakening global wheat prices in 2015, farmers may not be so lucky during the next 12 months.
Commonwealth Bank agri-commodities strategy director Tobin Gorey said the $A was forecast to dip in the near-term, but would likely recover later in the year.
“Our currency strategy team is looking for the $A to fall to 65 cents in the first quarter of the year, so any further pressure on prices will be absorbed and we won’t see prices fall,” he said.
“What we do expect to see later in the year is the $A rise a bit. It probably won’t be far from where it is at the moment – 69-70 US cents – but what that means is any further price falls in global prices will be felt in Australia.
“It’s hard to be optimistic about wheat prices.”
Mr Gorey said global wheat supply was outweighing demand. This resulted in poor prices in the United States, but little movement in Australia, where our falling dollar has softened the blow.
“If we look at prices for Kansas wheat during the past 10 years, the prices we see at the moment in $A terms are in the mid-range, perhaps a shade below it,” he said. “For the Americans, they’re talking the 20th percentile.”
A drop in US production is unlikely to eliminate the global surplus. Huge crop plantings are likely in Russia, Argentina and the Ukraine, where currency movements have lifted local prices.
“The signal to produce less is getting through to the US farmer alone at this stage, and that’s a critical issue for the year ahead,” he said.
Mr Gorey anticipated milling wheat would fall to about $250 a tonne next harvest.
