AFTER a horror start to the year, international grain futures have caught fire in recent weeks on the back of saturated paddocks in critical US soy and corn producing states in the Midwest.
As a result, US corn futures have risen to their highest level in three years and soybeans have also rallied, in spite of ongoing concern about the impact on the industry of the US / China trade war.
Locally, ASX January 2020 wheat futures have spiked to $359 a tonne, the highest value since November of last year.
Tobin Gorey, Commonwealth Bank commodity analyst, said a combination of the rising world market and increasing anxiety about the local crop had led to the rise.
"It is still dry in large parts of the country, and Western Australia, which provided the bulk of the grain last year, is still very much waiting for a break, people are starting to get a little nervous."
In terms of international pricing, Mr Gorey said it was a classic weather market.
"It is the time of year where weather can do damage to crops and at present what we are seeing is that it is damaging yield prospects.
"The wet weather in the US has passed beyond concern and is now doing real harm, there is no doubt the delay in planting is now costing tonnes of grain."
Ron Storey, Storey Marketing Servies, said the impact was being felt most strongly in corn.
"Corn is the crop that is planted earlier and there is some real talk about acres being now left to be planted for soybeans due to missing the corn planting window," Mr Storey said.
"Given the uncertainty surrounding soybeans and their markets that is not what the Midwest farmer wants to do."
Mr Storey said the rain delays meant much crop had missed the optimum planting window and with further rain forecast and then the resultant overly saturated paddocks, it could be early to mid-June before the crop eventually goes in.
"I am hesitant to say just how bad the situation is, as the old saying is that rain makes grain and for some the rain will help yields, but no doubt the current weather events will knock American production around."
Mr Gorey said there were also emerging quality concerns with the US winter wheat crops, which are not far away from harvest.
"There have been some wheat areas that have copped a bucketing of rain."
However, he added not all the US was wet.
"It is the opposite story in the important cotton producing regions of Georgia and the Carolinas in the south-east of the US, it has been too dry, so there have been rises in the cotton market too."
Mr Gorey said technical, as well as fundamental, matters had added fuel to the rally.
"The market had previously been very short grain, in particular wheat, they were betting on the crop comfortably meeting demand, so when this weather upset came along they really started exiting their positions in their droves.
Mr Storey agreed.
"The prices were not particularly high, so it did not take much to get that to turn around, at least some of this rally is due to investors getting some cover."
Mr Gorey said this was a classic pattern when an unexpected weather event hit.
"You often see a big, quick bounce in futures and that is what has happened here.
"Having said that, even with this rally it still hasn't taken values to high, in historic terms, levels."
"Even allowing for weather damage in the US, supply is not going to be tight globally.
He said it would allow the US to work through its extensive grain stockpile.
"The loss of production may see the US get through a bit of their inventory, but it is not going to mean a world shortage of grain."