Farmers watch wheat prices fall

Prices for wheat have fallen by up to 12 per cent month-on-month at port. See the factors behind the decline.

The wheat price has fallen by up to $30 a tonne in a month.

There was some reprieve for farmers who locked in forward contracts; however, for others, a combination of global markets and competition from last year’s remaining crop has pushed prices lower.

Wheat, delivered to Melbourne, was commanding $370 a tonne earlier this week.

However, four weeks ago, the value was $395 a tonne. The price drop month-on-month at one port, Geelong, was 12 per cent.

Early this week the Chicago Board of Trade wheat futures were at US$575.25, representing a fall of 17.59 per cent in a month.

Peters Commodities grain trader Peter Gerhardy said the price slide was a simple matter of market dynamics with more sellers than buyers.

However, the complexities were driven by uncertainty surrounding the northern hemisphere harvest.

“The new crop in Australia is going to be very reliant on the weather, and if it continues to rain, we will see the market come under further pressure,” Mr Gerhardy said.

“The price for old crop … has dropped by $25 a tonne,” he said.

Despite the market falls, Mr Gerhardy said he didn’t believe it would continue the downward spiral throughout winter.

He said there might be some additional movement or price falls before the end of the financial year, but there would likely be more stability after that.

He said there were also yield concerns for the current crop that was in the ground due to dry seasonal conditions.

“A lot of growers are saying their (yield) expectations are back by 10 to 15 per cent on what they were last year,” he said.

Episode3 director and analyst Andrew Whitelaw.

Episode3 director and analyst Andrew Whitelaw said often Northern Hemisphere growing areas might be affected by a production scare around this time of the year. And when that happens Australian prices are impacted positively.

However, that didn’t happen this year and there was no subsequent market rally in May or June.

For wheat futures, Mr Whitelaw said prices rallied as high as $409 a tonne at the end of May, and there were opportunities for farmers to lock in forward contracts.

Mr Whitelaw said prices were likely to stabilise in the next couple of weeks. He didn’t expect futures prices to fall below $320 a tonne.

Given that production wasn’t at record levels, he didn’t foresee a repeat of the falling prices experienced in 2016, when values dropped to $220 a tonne due to high supply.

Yarrawonga producer Nathan Lawless. Picture: Zoe Phillips

The World Agricultural Supply and Demand Estimates for June projects supplies to decrease to 5.7 million tonnes to 1,050.3 million, citing reductions in production for Russia, Ukraine, and the EU.

Yarrawonga grain producers Peter Lawless and his son Nathan said they were grateful they had used forward contracts earlier on in the season and were able to ride out the current bumps in the market.