Wheat prices rise as crop shrinks

Chronically low wheat prices are tipped to rise during the next two years, bringing some welcome relief to farmers.

World wheat supplies are tighter than ever before.

Chronically low wheat prices are tipped to rise during the next two years, bringing some welcome relief to Australia’s $16 billion cropping sector.

But US-based grain trading expert Bill Lapp told the annual Australian Grain Industry Conference in Melbourne that one of the reasons global wheat prices would rise was the shrinking size of this year’s Australian wheat crop as drought intensified across NSW, northern Victoria and southern Queensland.

World wheat supplies are also tighter than ever before, with growing demand in Asia for flour and wheat noodles but smaller crops in Europe, Russia and the Ukraine this season and global stocks low.

Demand for white wheat varieties, grown predominantly across Australia, is also exceeding import orders for the red wheat grown mainly in the US and ­Russia.

“White wheat is the tightest (market) in terms of world supply and stocks; so this will have a great influence on Australian wheat prices as well as the weakening Australian dollar,” Mr Lapp said.

“Aside from looming production problems, there is plenty to be optimistic about for price potential for Australian wheat; it’s going to be a case of good prices as long as you have a crop to sell.”

The deepening drought and a looming El Nino have slashed predictions for the size of Australia’s winter wheat crop from an average 26 million tonnes to below 20 million tonnes, as the major northern NSW wheat belt suffers major drought.

Mr Lapp said that while China had large reserves of wheat stocks, globally there was just 16 per cent more wheat held in storage than was produced and used annually, creating a tight supply situation. But the balance of wheat trade is also dramatically changing, with major grain exporters like Australia, which five years ago supplied 14 per cent of the world wheat trade, declining in importance to just 9 per cent of global exports.

In stark contrast, Russia, Ukraine and other Black sea countries are powering ahead with wheat and grain production, supplying 32 per cent of the world wheat trade in 2018-19, compared to 11 per cent in 2010.

Bunge Asia grains director William Syers predicted further improving prospects for Australian wheat exports on the back of the demand for more flour, noodles, bread, biscuits, pasta and instant noodles from economies such as Vietnam, The Philippines, Bangladesh, Myanmar and Thailand.

They all have large and growing populations, with substantial middle-class belts, looking to consume much more wheat and meat than rice.