PREDICTIONS of another bumper world wheat crop helped to push local grain markets lower last week.
Exporter prices continued to drift lower, helped by the positive outlook for the 2016 NSW harvest and reports of bumper wheat yields in the US.
APW prices into Newcastle port fell by $10 to $270 a tonne although prices into domestic markets proved more resilient, helped by limited grower selling. Sorghum slipped by $8 to $232/t delivered Newcastle.
Tumbling US wheat values was the major catalyst for last week’s lower prices.
US hard red winter wheat futures plunged by eight per cent last week, on reports of record yields through parts of Kansas – the largest wheat producing state in the US.
Kansas City wheat futures plunged to fresh 10-year lows, notching up a weekly decline equivalent to about $20/t.
Bumper wheat yields through the US hard red winter wheat areas means it’s becoming increasingly likely the US Department of Agriculture (USDA) will make further upward revisions to its estimate of their wheat harvest, which is already larger than last year.
Large carry-in wheat stocks adds to the heavy US wheat supplies. Recent USDA data shows that US wheat stocks were already the largest since the late 1980s, prior to the current harvest.
Fallout from the UK’s Brexit vote also weighed on global markets.
The US dollar rallied by three per cent after it became apparent that British voters had chosen to exit the European Union, making commodities more expensive as they are mostly denominated in US dollars.
A strengthening US dollar is typically bad news for global grain prices, as it makes it more expensive for grain importers.
Questions are swirling about the medium term impacts of the Brexit vote and much of the detail is still to be negotiated as a part of the exit terms with the EU.
However analysts are saying the decision is unlikely to have a major impact on global grain markets, other than further adding to the market volatility.
Uncertainties remain over the quality of the 2016 world wheat harvest, as rain continues to plague early harvesting in Europe and parts of the Black Sea.
However it’s becoming increasingly apparent that the world will remain awash with wheat supplies through the next 12 months.
World wheat ending stocks are already the largest on records and another bumper global harvest will make it worse.
