Australian wheat prices moved higher last week, shaking off the fall to their lowest levels for the year. Prices in northern NSW had fallen by more than $40 a tonne from early January, before recovering $10/t last week. Similar price moves have been seen in Qld, and in the Port Kembla zone.
In Vic and SA, the price falls from the end of December have been larger. For example, in the Melbourne zone growers have faced a $60/t decline. Prices lifted $5/t last week. In SA prices have fallen about $90/t from harvest highs but did not share last week's eastern Australian gains.
It is a similar pattern in WA, where Kwinana prices have fallen by more than $60/t from harvest, but again did not lift during last week.
The recent decline in wheat prices across the country seemed to mirror the drop in US futures. That pattern was broken the week before last though. Since then we have seen US futures stage a recovery, but that has not been picked up in prices in the export zones in SA and WA.
In those zones it looks as though the Australian market did not follow US futures down in full, and now have not begun to follow US futures higher. That indicates that US futures overshot to the downside on speculative selling, with the recovery largely driven by funds reversing their sold positions.
The lift in prices in eastern Australia is positive because it is signalling a lift in the market independent of what might be happening offshore and in our export port zones. It is signalling a lift in demand from endusers as they come back to the market to cover the next phase of their demand.
There may also be some nervousness about ongoing supplies for the domestic market. There are some reports of endusers taking advantage of the drop in prices to date to get coverage of their needs for the rest of the year.
That may be a prudent move as there is still doubt over whether there is enough grain held back to cover domestic requirements in full, after the much reduced northern sorghum crop.
We may well have now seen the bottom of the grain market in Australia. Domestic demand should put a floor in prices, and if supplies appear to be tightening, it should fuel price gains from here.
Internationally prices may also have gone as low as they need to at this time of year. Nearby futures hit their lowest levels since January 2018, before recovering by around 36 USc/bu over the last week. We are now entering the growing season for the northern hemisphere crop, and in the US in particular there are issues.
While recent rains have improved the US Hard Red Winter wheat crop, areas where Soft Red Winter wheat are grown are too wet. The commentary is that SRW wheat may be ploughed in and replaced with more profitable corn and soybeans.
Further north in spring wheat areas the snow pack is so deep that there are likely to be delays in planting spring wheat, and some acreage may also be held over for corn and soybeans.
In global markets the recent drop in wheat prices is also making wheat more attractive than corn in feed rations
