WHEAT prices are set to increase by the end of 2017, following a record harvest tempered by very low prices.
NAB Agribusiness’s In Focus: Winter Crop Harvest Update is predicting wheat prices will rise by about 12 per cent, largely due to NAB’s forecast of the Australian dollar falling to US70c.
NAB Agribusiness economist Phin Ziebell says while 2016-17 winter crop production was exceptional, the world was awash with wheat and prices remained generally poor.
“We’re not expecting much improvement due to global supply of major crops tracking at near record levels, but a lower Australian dollar would push prices northward,” Mr Ziebell said.
“The USDA’s latest estimates point to stocks posing a particular issue, with ending stocks pegged at almost 250 million tonnes. Ultimately, it’s hard for prices to rise when, globally, production is rising more than consumption.”
Australian wheat production in 2016-17 was exceptional, with Victoria production up an incredible 150pc on last year, NSW production up 52pc, and South Australia on track for big yields.
While arguably too early to assess the coming season with any certainty, NAB says the Bureau of Meteorology's models point to the emergence of el niño in winter this year, which is associated with hotter and drier conditions in eastern and northern Australia.
According to Mr Ziebell, the wet winter and spring last year that resulted in massive crop yields was consistent with the near La Niña conditions recorded throughout the year.
“This year, unfortunately, the bureau’s outlook is very different and we seem to have a much drier season ahead of us.
“2016-17 was an unprecedented crop. ABARES’ latest estimates put the wheat crop at over 35 million tonnes, which is more than 5mt higher than the previous record set five years ago.”