Growing concerns over the 2018 US wheat crop, as drought expands through key production areas, have provided a welcome lift to local wheat prices.
Kansas City hard red winter wheat futures – a comparable grade to Australia’s APW – jumped around $15 a tonne in the past fortnight, lending support to global wheat values.
La Nina weather conditions have pushed large areas of the southern and central US plains into drought, which account for most of the national wheat output. Key states including Kansas, Oklahoma and Texas have received a fraction of the normal winter precipitation.
Monthly crop condition ratings released at the end of January confirmed a sharp deterioration in the Kansas hard red winter wheat crop, the biggest production state in the US. The crop condition ratings are a uniform system of assessing crop conditions and progress published by the USDA. The winter wheat crop conditions are only published monthly during the winter dormancy phase, but the weekly updates resume in April.
Other hard red winter wheat states also showed marked declines in crop conditions over the past month.
Analysts are saying US winter wheat crops will still recover with rain ahead of the onset of the northern hemisphere spring. Nonetheless, the chances of below-average yields will continue to increase while the drought weather continues.
Local wheat values were modestly higher in the past week, partly due to the firmer tone in global markets, a sharp fall in the Australian dollar and declining sorghum crop outlook in Queensland and northern NSW.
Wheat quotes into Melbourne were $5 higher at $260, but there were trader reports of large parcels changing hands at upwards of $270 a tonne. Feed barley continues to firm, with container packers bidding $255 delivered at Melbourne.
It’s unclear how much of the firmer tonne in prices can be attributed to the strengthening in world values and the weaker dollar, or just exporters scurrying to cover in shorts.
Export and shipping stem data shows Australia’s grain shipping pace is off to one of the slowest starts in recent years. Record-large Black Sea wheat exports appears to be eating into Australia’s normal share of south-east Asian markets. This can be measured by the sluggish export pace from Western Australia and South Australia.
Ongoing dry weather in the north continues to support on-farm grain prices through eastern Australia. Landed Darling Downs wheat and barley values of about $330 a tonne is underpinning the on-farm grain prices through NSW and, increasingly, Victoria.
Widespread soaking rains across Queensland and part of northern NSW on the weekend is expected to apply some pressure to the northern grain markets.
Pulse markets were firmer last week on reports of fresh demand from non-Indian sub-continent markets such as Bangladesh and Pakistan. Nugget lentils were being quoted at $505 delivered Melbourne packers.