Prices tipped to rise over supply shortfall

Wheat prices could continue to climb, as Australia’s major wheat competitors face adverse conditions.

Europe produces about a fifth of the world’s wheat and prolonged dry conditions in the area have affected yields.

In the United States, wet conditions mean spring wheat planting is only at 54 per cent when it should be closer to 89 per cent, and the forecast rain could continue to hamper seeding.

Canada is in much the same position — last week, just 25 per cent planted instead of at least half of its program — and the window for seeding is fast closing.

In the Volga and Ural regions of Russia, dry conditions are holding up seeding, meaning the region is unlikely to plant all of its estimated 30 to 31 million hectares of wheat.

The situation could see already tight wheat stocks shrink further, laying the foundations for what could be a golden opportunity for WA grain growers.

Emerald senior grain merchant Brad Gosling said the ramifications of the global grain situation were already being felt.

“The dry conditions have had an impact, particularly in the main producing regions of France and Germany, ” he said.

“The result, and what’s driving some of the price action at the moment, is French farmers are washing out of their grain commitments, in particular wheat, barley and rapeseed.”

Mr Gosling said that under normal conditions, demand for WA’s old crop would ease as new season wheat from Europe, particularly Germany and France, started to compete in the Middle East, East Africa and sub-continent markets.

But this year, higher prices for the limited European crop could see old season wheat keep its competitive edge.

“It’s likely we will see continued demand for old crop from Australia, ” Mr Gosling said.

“This will be difficult for WA, given that so much of the crop has been marketed already, but it will add demand to South Australian and Victorian grain.

“With poor production in Europe, the prices being higher and supply less available, it means WA will receive more demand for the new crop as well. That’s why we’ve seen a little lift in prices over the past week or so.”

As of Monday, Emerald was offering $337 for new season APW2, free in store, while AWB was paying $343 and Viterra $340.

Barley and canola prices have also been boosted by the situation in Europe.

Gavilon canola and barley trading manager Bryan Keay said Europe was likely to produce 19 to 19.5 million tonnes of canola, rather than the more than 21 million tonnes expected in a good season.

He said it opened a window of opportunity for WA growers to sell into Europe during the January to May period.

“The short supply in Europe will mean high demand for Australian, particularly non-GM, canola, and it’s likely we’ll see a significant premium for non-GM again this year, ” Mr Keay said.

He added the dry weather was likely to push up barley protein levels, creating greater demand from China for Australian malting barley.

In terms of wheat, the grain industry has been keeping its eye on Russia and whether the Black Sea region will once again block exports.

“They can probably only make a decision on that from July, ” Mr Gosling said.

“There is speculation that Russia will commence some exports prior to that, but at the moment the trade is anticipating that Russia can only export about 10 million tonnes at the most.

“In the past, they’ve done as much as 20 million tonnes.

“It’s exciting for WA in particular, especially with some rain last week.

“We’ve already got a fairly high price environment and, with supply problems around the world, that could be sustained at least for the short term.”