January 9, 2009

Australia's wheat farmers are holding back their stock in hope for a recovery in price from a slump caused by worldwide bumper harvests and the financial crisis.

Farmers had also planted large crops due to high prices in early last year, but they were reluctant to sell their crops, as they hope to capitalise on Australia's recently deregulated wheat marketing system to sell to the highest bidder, rather than sending grain into pools as in the past, said grain handlers.

For the first time in nearly 70 years, Australian farmers could choose who to sell their grain to, after AWB Ltd was stripped of its market monopoly in last year's deregulation.

The amount of withheld wheat is unknown, according to grain handlers.

Wheat prices fell to US$4.71 per bushel in early December, from a record of US$13.49 in February. CBOT wheat for March delivery also fell 1.7 percent to US$6.02 per bushel.

While farmers are considering their options, rising grain exports reflect a recovery in production following the worst drought in more than 100 years across eastern Australia.

Alan Winney, chairman of emerging grain market Emerald Group, said the harvest is yet to be completed in Western Australia but total crop may exceed the estimated 20 million tonnes. Winney also estimated that 13-14 million tonnes would be available for export.