Wheat price ‘cushioned’

NAB Agribusiness general manager Khan Horne said generally the falling Aussie dollar would have a significant impact in cushioning any drop in global prices for Australian farmers, and he expected this to continue into 2016.

"The Australian dollar continued to fall in January and into February in response initially to the Swiss National Bank's decision to lift the cap on the Swiss Franc and later in response to the Reserve Bank of Australia's (RBA) February decision to cut the cash rate 25 basis points to 2.25 per cent," he said.

"There is increased confidence in a mid-year start to increases in US interest rates, which combined with the likelihood of at least another RBA rate cut in the coming months and expected further falls in Australia's terms of trade, sees lower forecast levels.

"In response, we have revised down our Aussie dollar/US dollar forecast, which now shows the dollar falling to a low of US74 cents this year and US73c in 2016 before recovery starting in late 2016 and into 2017."

However, global wheat stock could still take the shine off Australian pricing.

Rabobank senior grains analyst Graydon Chong said global wheat stocks were forecast to build to a four-year high of 197.9 million tonnes for the 2014-15 season.

Even so, this was not at a level that would shield prices from a crop failure.

"As a result, wheat prices will be more responsive to any crop reductions in 2015 than other grains and oilseed markets such as corn and soybeans," Mr Chong said.

On the upside, he said with Russian and Ukrainian trade restrictions in place, Australian wheat was more competitive into the Middle East market, which would help support our wheat price.

Towards the end of February Australian wheat prices were hit by the drop in US futures and a sharp drop in basis levels.

Bartholomaeus Consulting analyst Malcolm Bartholomaeus said Australian 2014-15 season wheat prices had fallen by at least $10 to $17 a tonne since January 30, when US futures were at similar levels to current levels, in both US dollar and Australian dollar terms.

"That is a significant loss in value which is not likely to be recovered even if US futures rise," he said.

"New season wheat prices haven't had the same drop in basis and are tracking very close to January 30 levels, however, they have slipped below levels that would attract grower selling."

Behind the slide late last month were projections released at the annual US Department of Agriculture (USDA) Outlook Conference, as well as a set of sluggish weekly export sales data that continued to show that US wheat was too expensive and was being shunned by the major Middle East importers.

"The major turning point for the market was a projection that US wheat stocks would rise by 10 per cent in 2015-16, to a new five-year high," Mr Bartholomaeus said.

He explained that even though the area planted to wheat in the US was expected to fall in 2015-16, the area being affected by drought was expected to be much smaller, allowing average US wheat yields to rise, triggering the rise in underlying wheat stocks within the US.

"Wheat acreage in the US is expected to pull back by 1.3 million acres (526,000ha), to 55.5 million acres (22.5 million hectares)," he said.

"Countering that is an improvement in the drought rating, with 45pc of the Hard Red Wheat areas of Kansas, Nebraska, Oklahoma and Texas being rated in good to excellent condition, up from 32pc last year.

"The expectation is that fewer acres will be abandoned this year, and yields will also be higher.

"At the same time, demand for US wheat is expected to increase, but not by enough to prevent US stocks rising to five year highs."

NICK Adams plans to sow about 1600 hectares of Gregory wheat this year across a number of properties in the Forbes district.

Mr Adams, "New Anglesey", farms with his father, David, and said they had a good start to the year with adequate falls of rain since Christmas to top up the soil moisture profile.

"It's been drying off a bit in the past week to 10 days, but further down the soil moisture is good," he said.

"We are on our second fallow spray, just to keep the weeds at bay until we start planting wheat in the first week of May."

Mr Adams said about 25 millimetres of rain just before planting would be ideal this year.

As well as sowing wheat, canola was part of the cropping rotation.

"Wheat's our main crop, but the canola give us a break in the cycle," he said.

Mr Adams is pictured in last year's wheat crop with his agronomist Cameron Corke, IMAG Consulting, Forbes.