Wheat and grain prices: Global markets tumble

Confidence in the growing season in southeast Australia is being offset by market uncertainty in the northern hemisphere.

Global wheat prices have succumbed to a surprise increase in the estimated area planted to corn, according to the US Department of Agriculture.

The recent rain and the increasing confidence in the growing season for grain growers in southeastern Australia is being offset by the changing grain markets in the northern hemisphere.

The impressive recent wheat price rallies have proven fragile as global grain markets tumbled last week.

Forecasts of rain supporting summer crops such as corn were enough to start the pullback in US wheat markets and this was followed with news of weak export demand and more cheap Russian wheat being offered to buyers.

December wheat futures on the Paris exchange fell $26 a tonne and Chicago wheat fell $55 a tonne.

Local new crop wheat prices did not respond with proportional falls. East coast Australian wheat traded in the ASX fell $7 a tonne last week and exporter bids in the Geelong port zone slipped $22 a tonne to a base price of $383 a tonne.

Forecasts of rain supporting summer crops such as corn were enough to start the pullback in US wheat markets. Picture: Damien Meyer

The outlook for the wheat crop in NSW is troubled by dry weather in the Northwest region which some estimate at less than half planted.

This region often represents more than a quarter of the area sown in NSW but is plagued this year by dry surface soil, moisture that is too deep in the profile, and a limited planting window.

World markets are facing the reality that they must compete with Russian wheat, which is firmly anchored to the market floor.

The Black Sea wheat futures contract suffers poor market liquidity but it does illustrate the relentless weekly fall in Russian prices of $US30 in the past seven weeks.

All other markets have rallied in the same period.

According to the International Grains Council, Russian wheat production is forecast at 44.7 million tones – more than the combined exports of the EU at 36.2 million tonnes and the US at 20.8 million tonnes.

This makes Russia the world’s largest wheat exporter.

Wheat prices also succumbed to a surprise increase in the estimated area planted to corn, according to the US Department of Agriculture.

With increasing competition for sales to stockfeed markets and a corresponding loss of area planted to soybean, wheat markets slumped and oilseed markets rallied.

Local canola prices are $30 a tonne higher this week.

Chinese demand may offer some hope to Australian grain growers.

Six weeks ago, the ripening wheat crops of Henan – a major producing province in China – were hit by damaging rain.

The recent heatwave in northern China may also affect the recently planted corn crop.