Wheat rally plateaus after rain lifts prospects in Russia, US

Finally, consumers get some relief as the long-running global rally in wheat prices ends with ASX futures falling $10 a tonne. But it’s not all bad news for growers.

Positive outcome: There’s some respite for grain consumers as price relief may come from further falls in prices. Picture: Zoe Phillips

AFTER eight weeks and on the eve of the Australian harvest, the world’s rally of wheat prices has steadied.

Rain through the southern growing regions of Russia and the hard-red wheat growing regions of the US has soothed some of the concerns that winter wheat planting would be limited prior to the onset of winter.

Large areas of Kansas and Oklahoma received 50mm to 125mm last week.

Adding to the selling enthusiasm were the profit takers and speculators who are less willing to engage in risky markets when the UK and central European economies are under threat by new outbreaks of COVID-19.

Russian wheat prices have been in this bullish trend since the first week of September. The rally has catapulted Black Sea wheat futures by US$50 a tonne.

Russian wheat prices are near record highs and export restrictions are being considered more to curb inflation than to address domestic shortages. The flow-on impact has pulled wheat prices in south-eastern Australia up $37 a tonne to $322 delivered port less freight to local site.

Grain consumers are thankful for the break in this trend and the price relief that may come from further falls in prices.

Grain growers are still in an extraordinary favourable season. A grain industry crop tour last month has uncovered some encouraging yield estimates.

Although the number of assessments were around a third of normal due to COVID restrictions, counts from more than 100 paddocks in Victoria have put the estimated state average wheat yield at 3.5 tonnes a hectare and barley at 4.4 tonnes a hectare.

Those estimates are supported by some early harvested Mallee barley crops coming in at 3.5 tonnes. Those yields are in the top 5 per cent of the 10-year yields recorded by the Australian Bureau of Statistics. The revenue outlook for grain growers for season 2020-21 should be excellent.

A well acknowledged threat to that revenue is the current La Nina weather pattern.

Continued rain is causing havoc to hay quality and is already impacting the grain harvest in Queensland and northern NSW.

Some growers are desiccating barley crops to even maturity and capture some of the premiums for old crop grain that have reappeared due to the delay in harvest. Prompt delivery BAR1 barley prices are up $12 this week to $272 a tonne delivered to end users in Melbourne.

If the wet trend continues, malting barley price premiums are under threat. Currently these sit on a nominal $14 a tonne compared with $25 this time last year.

A greater threat for barley could be if wheat is downgraded and domestic feed buyers swing from buying barley to wheat.

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