Australian wheat prices have continued to edge lower despite CBOT futures trading sideways.
However, the falls remains slow and steady, not providing any shocks to our market, and leaving prices high relative to US future prices, even for a drought year.
Harvest is progressing across all states, with GrainCorp reporting it is nearly complete in Queensland and northern NSW. Quality has been quite good despite recent rainfall. In southern NSW, harvest is gathering pace, with reports of yields being better than expected.
In Victoria, harvest is well under way, although delays were experienced with last week’s rains. To date, much of the harvest has been barley. Wheat harvest should be gathering pace from now on.
In South Australia, early districts have completed their harvest, while later districts are just starting on wheat. Rain has caused delays; there’s also reports of reasonable quality and better than expected yields.
The Western Australian harvest is progressing well, and with little rain in the forecast should rapidly progress to 50 per cent complete. That said, some traders were struggling to get wheat accumulated for early shipping deadlines because of the late start to harvest in some regions.
One theme seems to be that given the season, crops are yielding well. It has been 10 years since a season has challenged us nationally, and since then agronomic practices have evolved. The end result is that where crops would have been abandoned previously, they are now producing modest yields of reasonable quality grain.
The final size of the Australia crop remains hard to estimate, but one would expect it to come in a little better than some of the lower projections we have seen.
Wheat prices are still very high, and while they may ease for a little longer, there’s no reason for wheat prices to return to global price levels until bins are filled properly.
At this stage, December 2019 futures are running at close to 545 US¢/bu. This is 45 US¢/bu, or A$22.85 per tonne, above December 2018 futures prices. Assuming a return to normal basis levels by the 2019 harvest, current futures prices are suggesting a cash market of about $300 per tonne in South Australia, $10 per tonne more than in NSW and Victoria.
The potential year-on-year declines range from $25 per tonne in Western Australia, to $140 in NSW. Victoria would be looking at downside of $110 per tonne, while South Australian prices would fall $70.
Without a sharp lift in global wheat prices during 2019, Australian wheat prices are set for a major price fall between now and the end of 2019.
