Price pressure

Wheat price fluctuations and recent wet weather across most grain-growing areas of the State could put many WA farmers under significant financial pressure going into 2012.

Richard Vincent, of Independent grain marketing advisory group MarketAg, said wheat prices had fluctuated by more than $100 a tonne within the growing season for the fourth consecutive year.

"Unfortunately, that move is the wrong way this year, with current APW2 bids around $240/t FIS," he said.

Some grain producers who locked in a proportion of their crops at pre-seeding APW2 price levels of about $360/t and experienced above-average production might come through the 2011 season with decent profit levels.

But Mr Vincent said others, especially those suffering from wheat quality downgrades, could be under pressure.

Mr Vincent said it was too early to tell how much of the WA wheat crop would be downgraded in quality on the back of the wet weather during the past two weeks but it was a major concern for the entire agricultural sector.

"Sprouting in susceptible wheat varieties through the northern and central Wheatbelt is an increasing worry, especially in some early sown varieties like Magenta," he said.

Mr Vincent said several clients had FED1 deliveries for wheat in the past week due to falling numbers but most downgrades appeared to be to AGP1. He said the risk of further rain events could result in numbers reducing further.

Mr Vincent said discounts for AGP1 at the start of this week ranged from $30/t to $60/t (from APW2) in the cash market and discounts for FED1 ranged from $47 to $80/t (from APW2).

"The general theme to date has been premiums for high-protein grades getting bigger and discounts for lower grades getting bigger," he said. "This makes monitoring grade spreads more important than ever this harvest. With tight cash flows in many businesses, correct load allocation could add significant value."