WHEAT prices have failed to rally after a late June collapse where they hit the lowest levels on international futures exchanges in a decade.
The September wheat contract on the Chicago Board of Trade (CBOT) remained at US430 cents a bushel on Monday morning, the lowest level for a near contract in ten years as world wheat supplies sit at 15 year highs..
Following a negative US Department of Agriculture (USDA) report late last month Thursday wheat futures fell around $A20 a tonne up until Monday and the Australian cash price has followed futures down, with some new crop upcountry bids at below $200/t.
The slump, which is based on higher than expected stocks and better than expected international wheat production, has seen over US100c/bu fall from the September contract since the early June rally, which peaked on June 9.
This equates to a close to $A50/t fall in prices.
Currency and basis has shielded the Australian market from some of the fall, but ASX NSW wheat futures for January delivery were down at $248/t on Monday, while cash markets for new crop have fallen by around $30/t in the same period.
Ideal conditions in virtually all key major wheat producing nations have seen the International Grains Council stack on an extra 7 million tonnes of production in its latest 2016 crop estimate for a total global crop of 729 million tonnes, pushing out the world wheat surplus to 9 million tonnes.
The only skerrick of positive news for pricing is emerging quality concerns in Europe.
France in particular has copped a bucketing of heavy rain over harvest, downgrading Europe’s largest wheat crop.
Prices on the major French futures exchange MATIF now have a premium over equivalent quality wheat on CBOT.
There was no corn-inspired relief to the wheat sector following the USDA report, which flagged higher than expected corn acreages along with solid yields forecast and saw corn values fall heavily as well, although there has since been a rally on the September contract, due to concerns surrounding hot and dry late July weather in the US.
The market has been wary of a potential La Nina weather event emerging during corn’s critical development periods of July and August and delivering hot and dry conditions in the US, but at present crops are in good condition.
NAB agribusiness analyst Phin Ziebell said it was difficult to find significant upside for wheat prices in US dollar terms given the forecast for strong global supply.
CBA agriculture analyst Tobin Gorey said critical Black Sea producing nations were also sitting pretty.
“The Black Sea region has entered its harvest period and a solid growing season means bumper crops are expected,” he said.
In South America, the weak La Niña event is being interpreted as broadly positive for wheat production.
