AFTER a choppy month in world wheat markets, with the price rising and falling according to climate risk on one and and trade concerns on the other it appears there is now a more sustained push upwards.
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Concerns with dry weather in the Black Sea and western Europe have combined with the Australian drought to spark the world wheat market to life after weeks of prices rising on production news and falling on fears of a trade war.
The market’s renewed focus on production woes has been reflected in the prices paid by the world’s largest importer of wheat, Egypt.
The central Egyptian wheat buyer GASC paid an extra $A20 a tonne in its most recent tender this week than in its previous tender a fortnight ago, with the new price equivalent to $A316/t.
The Egyptian news is also notable as GASC generally waits for a dip in the market before making purchases, however this time it has negotiated the new tender, for September delivery, just a fortnight after its last one, due to concerns about a rising market.
Locally, analysts are in a race to the bottom to find an appropriate number for the upcoming wheat crop.
Long-time grains analyst Malcolm Bartholomaeus said he had heard of some commentators putting out estimates as low as 13 million tonnes, just a tick over half the long term production average of 25 million tonnes.
This is almost a third lower than most mainstream forecasts, which hover between 19.5 and 22 million tonnes.
Mr Bartholomaeus said while the reason was poor for many, the 13 million tonne figure was likely to be on the low side.
“A 13 million tonne crop is a small crop, and there are several factors that should prevent us dropping that low,” he said.
“Firstly, not all of the country is facing a severe rainfall shortage, and when gauged on April to July growing season rainfall it is not as bad in some other areas either.
“Secondly, it is so long since we have had a serious national drought, that we don’t have a good handle on how current varieties and farming systems will respond.”
On the world stage, Mr Bartholomaeus said the pieces were falling into place for lower production and higher prices.
“We could be seeing something that we possibly haven’t seen since 2006 where we have a drought in Australia and there are also multiple key wheat producing areas with an issue.”
“That creates interest as it will be the first time since deregulation that we’ve faced a situation like this where there are both high domestic and international values and scarce supplies.”
Tobin Gorey, Commonwealth Bank grains analyst, said it appeared production concerns, especially in Europe and Australia, were now outweighing worries the market had about a US-China trade war and its impact on grain markets.
He noted hot spots within the grain market this week, with European and Black Sea prices both reaching seasonal highs in line with growing concern around production.