So far so good for wheat

Current wheat prices should remain well supported in the short term, according to CHS trading manager Chris Brown.

However, over the longer term, there was no reason to be bullish, Mr Brown told delegates at last week's AAAC conference in Perth.

Mr Brown said the current wheat price was gaining support from decent export milling wheat values.

Furthermore, the Australian crop was likely to be smaller than initially forecast.

Many international analysts are still expecting a 24 million-tonne wheat crop but CHS's view is this will be closer to 22-23 million tonnes because of drought in the Eastern States and weaker finishes in WA, SA and Victoria than initially expected.

Mr Brown said a recent rally was led by cold weather in Russia, which was causing establishment problems in the winter wheat crop now being planted.

"For the rest of this harvest, I expect wheat prices to be fairly well supported," he said.

"But as we lead into the northern hemisphere new crop season, I expect we will be heading into a lower price environment again due to big corn, soy and wheat stocks.

"Even if we just get average yields based on what we think will be planted in the US, we will be looking at fairly sizeable stocks to deal with again."

On barley, Mr Brown said the buoyant barley price would remain supported in the months to come, provided Chinese policy remained favourable.

"Chinese feed grain demand is the primary driver of Australian barley values firming," he said.

"Meanwhile, exportable surplus in Australia has declined by around 2 million tonnes, year on year, due to lower production.

"And lower malt production in the US and Canada is also holding up Malt 1 premiums in Austra- lia."

But Mr Brown said it was difficult to know how next year's northern hemisphere crops would affect barley as this was likely to again create a global surplus of feed.

"We can't determine with any accuracy how these crops will affect barley demand, but for the remainder of this year we are bullish," he said.

"We know broadly what is coming off in Australia and are comfortable that there is plenty of demand in the short term."

Mr Brown was less positive about canola.

Although the price has recently recovered while exporters covered their short positions, Mr Brown said Australian values were not competitive and were not being supported by bids from China.

His longer term view is also bearish given the expected large soy crops in Canada and the US.