Wheat prices skyrocket to record levels on back of northern hemisphere events

After complaints Australian wheat was being sold too cheap, local prices have surged to record levels. See the eye watering numbers.

A perfect storm of events has grain prices in Australia skyrocketing to record levels.

Australian Standard White wheat prices last week jumped $38 a tonne and a further $30 a tonne on Monday to land at $500 a tonne delivered to Geelong or Melbourne buyers.

Feed barley prices have now hit a record $450 a tonne.

Wheat is closing in on prices of $500 a tonne in Australia, prompting a windfall gain for those who still have crop to sell. Picture: Zoe Phillips

While wheat prices are still well behind Chicago Board of Trade July futures prices — which were sitting at the equivalent of $657 a tonne overnight — local farmers see the market responding to criticism Australian wheat was being sold too cheap and the global price was not reflected in farm gate returns.

The surge in local wheat prices came as:

THE US Department of Agriculture estimated Russian wheat production this harvest at 80 million tonnes, about five million tonnes less than what the market expected.

USDA forecasted Ukraine’s crop at 21.5 million tonnes, 11.5 million tonnes less than last harvest.

GLOBAL wheat stock estimates by the USDA fell by 12.7 million tonnes, the third year in a row of decreasing stocks.

INDIA banned exports of its wheat.

RABOBANK reported a poor US winter wheat outlook.

Not all factors were expected to have long-term effects on the market.

CBA commodity analyst Tobin Gorey said the effect of the Indian ban would take time to assess, as a sale to Egypt for half a million tonnes would be shipped and the Indian Government committed to supplying poorer nations.

India has exported about eight million tonnes last harvest and the USDA had expected to ship a similar amount in 2022-23.

Rabobank said in its report the war in Ukraine was having an effect on global supplies.

“With global supplies plainly unable to cover Ukraine’s shortfall, prices are moving higher to ration or limit demand,” it said.

The bank said the USDA’s forecast of substantial rises in Canadian and European Union exports of wheat were “optimistic”.

“In any case, despite a fairly significant reduction in wheat feed demand of 7.5 million tonnes, global stocks are seen down by 12.7 million tonnes, which paints a picture for a well-supported market for the foreseeable future,” it said.

Australian farmers were in the box seat to capitalise on global demand, with all grain growing regions with the possible exception of Queensland, expected to produce another big crop.

Victorian Farmers Federation grains president Ashley Fraser said a lot of northern hemisphere grain had been stripped out of the market.

“So they’re looking to the southern hemisphere to fill some of those gaps,” Mr Fraser said.

“We had the cheapest wheat in the world a month ago.

“Naturally, we will see prices increase (in Australia) on a realignment in that pricing.”

Some growers still to sell last harvest’s crop were waiting for prices to hit $500 a tonne.

“I can’t recall it ever hitting $500 a tonne,” Mr Fraser said.

“We probably need that to offset the rise in input costs.”