New season wheat prices continue to cool off significantly in light of the increasing likelihood of a good northern hemisphere wheat harvest - but experts expect corn values to put a floor in the wheat market and keep prices at historic highs.s.
Chicago Board of Trade (CBOT) December 2008 futures prices have had almost a third shaved off their March highs of around US1280c/bu.
This week, they’re sitting around US840c/bu.
On the domestic front, AWB has reduced its 2008-09 estimated pool return (EPR) by a $30 a tonne (see separate story), to leave the new season pool in the range of $350-370/tonne for the benchmark APW grade.
Along with the expected hike in wheat production in the northern hemisphere, which has led to US Department of Agriculture (USDA) predictions of a world record crop, Australian farmers are also suffering from high exchange rates, with the Aussie dollar still trading at over US93 cents this week.
AWB Australian commodity management division general manager Mitch Morison, says the latest prices reflect ongoing significant falls in international wheat futures.
"The risk premium in US wheat futures has been dramatically reduced as buyers become more confident with the outcome of the northern hemisphere winter wheat harvest,” Mr Morison says.
“Northern hemisphere crops are in excellent condition, with the European Union, Russia and Ukraine set to compete aggressively in the export market when their new crop becomes available from mid July onwards.”
On the bright side for growers, the US corn market is beginning to rise and is likely to provide a floor in the wheat market, ensuring prices are likely to remain at the top of the historical cycle, in spite of shedding approximately $A120/tonne in the past two months.
Callum Downs commodity analyst Malcolm Bartholomaeus says, “Even if we maintain current projections of wheat production, it is going to take us until 2012-13 before we will be really back to a level of stocks that truly gets the world out of trouble - and that is assuming there is no further increase in wheat consumption,” he says.
“So you can see it is going to take a while.”
On the old season front, AWB estimated pool returns (EPRs) have remained steady, with values for AWB Number 1, No. 2 and No. 3 2007-08 pools unchanged.
The 2007-08 EPR for APW grade for the No. 1 pool remains at $418/t, the No. 2 pool is at $399/t and the No. 3 pool is at $350/t.
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