Oversupply jitters rattle futures

Australian prices under pressure as promising rainfall in much of the northern hemisphere points to strong harvests all round.

Sowing time: Australian wheat and barley prices are under pressure with favourable conditions expected to create oversupply. Picture: Zoe Phillips

PRESSURE continues to build in grain markets as favourable conditions in both Australia and the northern hemisphere weigh down prices for wheat and barley.

Rain through central Europe last week was welcomed by growers as crops mature in their spring weather.

Conditions are drier further east as growing regions of the Ukraine and Russia failed to receive the same falls as the Europeans.

Wheat markets in both the US and Australia are tracking these European trends, as the EU and Black Sea producers are setting global wheat prices.

While French and US wheat futures fell $2.85 and $3 a tonne for the nearby months, falls for the December contracts were $6.50 and $7.50 a tonne respectively.

Favourable planting conditions for US corn and further downward pressure on ethanol and crude oil prices have cut corn futures again this week.

The erosion of prices has been higher in Australia.

Some growers are holding off sowing until more rain comes in northern NSW and southern Queensland.

However, rain has blanketed growing regions of Victoria and NSW, with at least 25mm last week and many centres receiving more than 50mm.

Australian Premium White wheat is quoted at $310 a tonne, down $10 and BAR1 grade barley is widely quoted at $250 a tonne down $16 delivered to Victorian ports in December.

Old-crop wheat and barley markets are falling more slowly.

Although grain stocks remain tight following the drought, the market has adjusted to the new demand profile.

Grain stored in the central handing system suffered much greater falls as both wheat and barley fell at least $23 a tonne.

BAR1 grade barley fell $10 to $303 a tonne and Australian Standard White wheat fell $13 to $387 a tonne delivered to end-users in Melbourne.

Those who hold large stocks of grain are wary of the steep fall in new-crop prices.

Compared to current rates, new-crop barley prices are $20 a tonne lower and wheat prices $45 lower.

This represents a threat if grain is to be carried over to the new season.

Domestic buyers have pulled back from the market, to take advantage of the downward push.

Rather than buy grain for nearby delivery, traders believe some consumers are taking early delivery of stocks reserved for winter.

After an impressive run-up in prices from $670 a tonne in mid-March to $835 two weeks ago, nugget lentils have fallen back to $755 delivered to Melbourne grain packers.

Some initial hoarding of stocks in Bangladesh is believed to have caused the initial run-up but the wholesale market is now saturated and further shipments are held up at port.

Smaller nipper type preferred in Bangladesh are at $825 a tonne, down $25 this week.

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