IN SPITE of bearish news, both on an international and domestic front, cash prices for new crop wheat and malt barley continue to hold firm at around $300 a tonne on the east coast, and $335/t on the west coast, due to the contrasting seasons on both sides of the nation.
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There has been significant speculation from within the industry that prices have peaked for the year, but as yet, there has been no sign of a marked drop.
Some have speculated insect and mice concerns in areas poised to otherwise have bumper years in NSW, SA and Victoria, is holding prices firm for now at a local level.
However, international futures also remain steady.
Last week’s US Department of Agriculture report contained both good and bad news.
Estimates for 2010-11 production across the globe was lowered, on the back of yet another reduction in European and Former Soviet Union (FSU) crops, although this was tempered by a small uplift in Canadian forecasts.
However, the reduction was not as large as had been factored in by other analysts, and combined with a lift in stock estimates and lower consumption forecasts, on the back of higher prices, the report was generally regarded as bearish for the market.
Chicago Board of Trade (CBOT) figures have remained virtually unchanged, with the December '10 quote still at US736 cents a bushel.
Locally, ASX grains futures are at $310/t for November contracts and $288/t for January contracts, factoring in the prospect of a large domestic harvest.
This week’s Australian Bureau of Agricultural and Resource Economics / Bureau of Rural Science (ABARE-BRS) production estimates have talked up the prospect of a big Australian crop, especially on the east coast.
There was a 13pc increase in wheat production estimates from the June report to the September forecast, taking production up to 25.1 million tonnes of wheat.
This is despite slashing 2mt off the Western Australia forecast.
The forecast is more than 2mt higher than the USDA estimate.
The widening gap between east and west coast prices comes down to regional supply and demand – less grain is expected to be available in the west, and a glut is expected in NSW and Victoria.
There are concerns from state farming organisations that there could be a huge logistical strain on the supply chain, which could lead to marketers struggling to move the crop to market.
Meanwhile, Australian growers can expect no relief on the currency front.
Strong Chinese growth figures, which are virtually interchangeable with Australian growth over the past two years, combined with further weakness in the US economy are likely to further strengthen the Aussie dollar.
The prospect of parity against the US dollar has been raised once again, with the current rate sitting just above US93c, while the dollar is also trading very close to record levels against the British pound, at GBP0.62.
This week saw the dollar hit record levels against the euro, reaching a value of 73 euro cents.
