Old season wheat prices dip

Prices hit their lowest levels since May as US grain export sales slumped and harvest pressure in both the US and Europe continues. There was also a forecast for cooler weather with some rain in the US, which was seen as helping yield prospects for both their corn and soybean crops.

The Australian dollar also hit its highest level since April. The combination of a high currency and low futures prices pressured the $A value of CBOT futures, pushing that measure of prices to its lowest level since late May as well.

The downward move from offshore markets has also flowed through to our market, with prices down across the board for old season wheat. East coast prices seem to be keeping a relatively stable spread to SA and WA prices, which in turn are pricing themselves against offshore price indicators.

We also have old season prices realigning with new season prices. As a part of that process old season prices gave up more value than new season prices last week.

We also saw new season prices in export zones of SA and WA hold their ground against the sharp decline in CBOT values last week. That can often be the case, with our market moving in a more measured way against volatility in overseas daily markets.

As we move through the second half of the calendar year we will continue to see new season prices juggle themselves into the levels required to move grain from where it is being produced, to where it is needed for consumption.

Right now that sees Port Adelaide prices at reasonable levels (i.e. an explainable basis level) against US futures, and prices at inland locations within the Newcastle zone at levels that will allow SA grain to move by rail if needed.

We also have the movement of old season prices closer to new season prices so that they eventually converge. Last week we saw that convergence in the Newcastle zone, and the spreads closed up elsewhere as well.

Soon both old and new season wheat prices within Australia will be moving in line with offshore market signals. Individual port zones will only begin to deviate from that if there are significant projected supply shortfalls that need to be filled.

We also have competition from imports in NSW. Now that this pathway is open and operating it will remain a threat. This should prevent NSW prices from going to the extreme levels we saw last year.