Wheat on a high

Growers' bottom lines are beginning to look more promising, as wheat hits the magical $300 a tonne mark.

On the back of hot and dry weather in the US, corn estimates have nose dived, in turn driving up WA's wheat prices.

By Tuesday, APW2 multigrade was trading at between $306 and $312/t - a turnaround from the depressed prices earlier in the year.

Prices have been on the upward march for the past six weeks, as poor weather in Russia and the US begins to affect crops.

According to National Australia Bank agribusiness director of commodities Tim Glass, all eyes are now on the US Midwest where corn crops are pollinating.

"The crop in the US has been hit hard, with little to no rain for six weeks and high temperatures of 32-43C occurring consistently across most crop growing areas," he said. "We haven't seen weather conditions like this in the US since 1988.

"In the last six weeks trade in the US has dropped yield estimates for corn from 166 to 149 bushels an acre, with some suggesting the current weather conditions could drive yields down to 140bu/acre within weeks."

Emerald senior grain merchant Brad Gosling said those projections were at this stage only estimates and the amount of further upside in the market might be limited by demand.

Mr Gosling said the market had already begun to slow on the rally early this week.

"At these prices ethanol production is not profitable in the US, so although production could fall a little more, many in the industry are starting to look at the demand side and trying to ascertain whether demand will fall at these high prices," he said.

"Not all consumers will be able to switch their demand but those that are price sensitive will. If that occurs on a reasonable scale then some of the demand pulls away from corn and prices will ease."

But while the errant weather overseas might have rallied prices, concerns exist for WA's crops.

Despite wheat plantings increasing by 17,000 hectares over last year, the Grains Industry Association of WA (GIWA) is estimating a wheat harvest of 7.6 million tonnes, compared to last year's haul of 11 million tonnes.

Crops across large areas of the State are up to a month behind schedule for yield potential.

Across the Kwinana zone just 10 per cent of canola and cereal crops were estimated to be in good condition, while the rest have been described as poor.

"From Northam to Southern Cross, there are islands of good crop growth, however, 70 per cent of crops are rated in below-average to poor condition," the GIWA report said.

A quarter of crops in the Geraldton zone were described as very poor, while in Esperance, roughly a third of crops were said to be poor and a third, good.

Albany zone had just 11 per cent of crops looking "poor" while more than a third were rated "good".

According to MarketAg and ConsultAg director Kim Povey, that meant only some areas of the State would be able to capitalise on the improved prices.

"In most cases the break-even prices for guys who may be looking at a decile one or two year will be over $300/t," Mr Povey said.

"It might not make a lot of difference to them - they're probably still in financial difficulty because the year isn't shaping up.

"For guys in the central, Great Southern and south-east areas they are still on track for an average year and probably have a break-even price of $270-280/t.

"For them, prices at $300-$315/t are quite profitable and they'll be locking in a reasonable amount of profit if they get an average year."

Considering many budgets earlier in the year were done on wheat prices of about $260/t, $300/t-plus wheat prices give growers a chance to claw back some much-needed equity.

"An average year, with these prices, will help them get their businesses back on track," Mr Povey said.

"For a lot of growers all that last year did was help them tread water.

"This is going to provide the opportunity to reduce some debt and improve equity or cash flow, which has probably been the real casualty of the last few years.

"The only thing people need to keep in mind is the prices at the moment aren't assured come harvest.

"But they need to consider what, if any, they can afford to price given their production risk and they need to keep costs under control."