THERE has been a sharp decline in US wheat futures this year, as the runaway US dollar impedes the ability of American grain exports to remain competitive.
However, with the Australian dollar falling in this period, Australian grain prices have remained relatively steady over the same period, as favourable shifts in currency and firming basis combine to cushion any potential blows.
On Tuesday, Australian cash prices for APW quality wheat hovered at around $290 a tonne port, with Chicago Board of Trade (CBOT) wheat futures at US520 cents a bushel for the March contract.
There have been falls in grain prices among Australia’s export competitors too, including Europe and Canada, although these exporters have also benefitted from increased competitiveness against the US on the currency front.
Analysts across the globe are now debating whether US futures have reached their low or could fall further.
Locally, the trade is saying much of the cereal crop has now been sold.
Dion Costigan, Link Brokering, based in Bendigo, Victoria, said he would estimate his client base would be up to 85 per cent sold, with more cereals sold than canola, although farmers had ramped up canola sales on a small post-harvest rally with prices up to $500/t port.
Lachie Stevens, Lachstock Consulting, Geelong, Victoria, said currency was a big factor on pricing at present, with little fundamental production news across the globe.
Domestically, he said farmers may see even further falls in the Aussie dollar if the Reserve Bank drops interest rates next week as is widely forecast.
He said basis, which had firmed up in 2015 in line with the decline in US futures, meant prices in Australia remained strong.
“We’re possibly just a little too strong in terms of winning export demand on wheat, but there seems to be a bit of barley business being done.
“The prices have meant farmers are probably more sold than normal for this time of year.”
In terms of domestic demand, Mr Stevens said the industry would be watching potential rain in summer cropping zones later this week, which will bolster sorghum production.
Mr Costigan said the lack of volume being traded at present locally meant the market was relatively stagnant.
“We haven’t seen any big amounts of grain being sold, a lot of growers have already marketed their grain earlier given prices at harvest for cereals and through the early parts of this year for canola have not been too bad.”
He said he was keeping an eye on the dynamic in the Black Sea region as a potential driver of the market.
“If things get messy there again, we could see things move around a bit.”