Local Grain Focus | US wheat futures tumble

US wheat futures tumble


Grains
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Stockfeed wheat bids into the Riverina tumbled $22/t last week.

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Australian traders and grain buyers, who use US wheat futures as a market to hedge risk, struggled to make sense of the recent sharp selloff in futures.

Australian traders and grain buyers, who use US wheat futures as a market to hedge risk, struggled to make sense of the recent sharp selloff in futures.

Benchmark Chicago Board of Trade wheat futures have plummeted by close to 10 per cent in little over a week as anxious investors question the sluggish export pace.

The CBOT May wheat futures were holding at $US5.25 cents a bushel in mid-February, but aggressive fund selling has resulted in prices tumbling below $US4.70c/bu early this week.

US wheat futures have come under heavy selling pressure in recent weeks as investors becoming increasingly pessimistic about the wheat export forecasts.

Stronger than expected shipments of Russian wheat between July and December combined with a slowdown in import demand by some major importers has left traders questioning if the US Department of Agriculture’s forecast US wheat export forecasts will be reached.

Australian traders and grain buyers, who use US wheat futures as a market to hedge risk, struggled to make sense of the recent sharp selloff in futures.

Traders have commented that US wheat prices had fallen to levels where it was among the cheapest in the world which has seen an improvement in the export sales pace.

Local grain markets have also been under pressure in a mix of softening global prices and trader selling. ASX wheat futures for a March delivery have fallen by $12 a tonne to $394/t in the 10 trading days to Tuesday. Cash markets have also come under considerable selling pressure.

Stockfeed wheat bids into the Riverina tumbled $22/t last week to $400/t, down from $440/t at the start of the month. Melbourne and Adelaide grain prices have also moved sharply lower. Although losses in northern NSW and southern Queensland were less pronounced.

Newcastle sorghum prices were steady to firmer last week with trader bids hovering around $400/t. A lot of the sorghum crop is being downgraded due to high screenings which has been supportive for prices.

Extremely dry soil moisture levels are a major concern for the 2019-20 winter crops in Queensland and northern NSW. Farmers were hoping that ex Tropical Cyclone Oma may deliver rain for the northern cropping areas last week, but this didn’t eventuate.

Upper layer soil moisture levels in January for nearly the major cropping areas in Queensland and northern NSW were estimated were estimated to be in the driest 10pc from between 1910 and 2015, ABARES said.

Bumper grain crops in Western Australia have helped bolster national production estimates despite the east coast registering its smallest winter crop in more than a decade.

ABARES forecast the Western Australian wheat crop was forecast at 10.1 million tonnes, making it the state’s third largest and barley was raised to a record large 4.9 million tonnes.

By contrast, the combined east coast wheat and barley crop scraped in at six million tonnes, making it the smallest harvest since 2006-07, according to ABARES forecast.

The east coast drought has presented mixed fortunes for some of the industries major participants.

Drought has weighed on GrainCorp’s earnings for the 2018 fiscal year which were down 31pc on 2017.

GrainCorp said that good performances from its malt and vegetable oils businesses helped to offset the impacts of drought on the grain business.

By contrast the drought impacts were more complimentary for stockfeed manufacturer Ridley, where strong sales to the dairy sector with solid margins underpinned a solid first half for the 2019 fiscal year.

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