IN spite of a lack of fundamental news, grain prices have rallied sharply over the past week.
Australian wheat prices are now in excess of $300 a tonne port in many regions for APW grade grain.
A depreciating dollar is having a massive impact, but international futures in key commodities such as wheat, corn and canola are now at their highest levels since the Ukrainian crisis sent markets spiralling at the end of May.
Forward contract prices in May were around $310-$320, with an Aussie dollar of US93 cents, compared to US82c now.
Once again, it is geopolitical concerns in the Former Soviet Union that is weighing heavily on investors’ minds.
The market has been watching Russia closely, looking for clues as to whether the Russian government will slap a ban on exports to shore up domestic supplies after a feverish export program in the second half of this year.
Publicly, the Russian government has said it is considering all options in order to protect domestic supplies and hose down the possibility of food price increases.
Dollar dip impacts
Russia aside, the declining Australian dollar is the biggest news for the local grain trade.
The dollar briefly dipped below levels not seen since 2010 late last week and remains at US82c.
Every cent in currency fluctuations equates to a change in wheat prices of $3.31/t, so the fall of the dollar in the second half of this year has allowed Australian grain to become more competitive on the world stage.
Lachie Stevens, Lachstock Consulting, said the weakening Australian dollar had pushed the market along over the past month.
“There’s been quite a bit of harvest selling at these values.”
And he added the support for the market was transferring across to 2015.
“Australian Stock Exchange grain futures for 2015 are extremely strong this far out.
“The implied basis on those prices may be a little softer but it is still strong, its still historically a good number.”
At present, he said the Australian market was focusing on barley.
“There is a good amount of barley trade happening at present.”
Duncan Whittle, senior grain trader with Agrex, said even though the strong Australian basis was being eroded, the fall in the dollar meant Aussie growers were insulated against a price fall.
“It’s been a major factor in grain prices over the past month.”
In terms of the Russian situation, Mr Whittle said the market was taking the potential impact seriously.
“At present, the talk out of the Russian government means the market is taking the possibility of restriction to exports seriously.”
Mr Whittle said farmers had generally been happy with the prices and had been selling.
“We are hearing Western Australia is very heavily sold, with a bit less done in South Australia and the east coast.
“However, grain hitting the market is being snapped up quickly, indicating there has been a fair bit of selling already.”
Brett Hosking, Victorian Farmers Federation grains group president, said many of his members had already sold their grain.
“Prices have been pretty good apart from canola and people have been happy enough to sell at these values," he said.
“There is definitely still some grain on-farm, but a lot of it has already been sold.”