May 7, 2010

Australian wheat exports rise by 20%, but faces tough competition ahead

Wheat exports in Australia rose 20% in March this year to 1.43 million tonnes from 1.19 million tonnes in February, but were down 29% from exports of 2 million tonnes in March 2009.

The overall pace suggests exporters could still face hard competition and low prices in a weak global market by end of year, Commonwealth Bank of Australia commodity strategist Luke Mathews said Friday (May 7).

While shipments encouragingly rose in March from a disappointingly low figure in February, the latest overall result is negative and isn't surprising, given that Australian wheat remains expensive on the international stage, Mathews said.

"Until that trend starts to reverse, then we continue to expect quite sluggish export numbers out of Australia," he said.

Australian prices must fall at least 5% to below US$200/tonne free on board to align first with US prices, but that fall will still keep Australian wheat way more expensive than Black Sea origin wheat at US$160-US$170/tonne.

Mathews said the longer Australia stores wheat, the greater risk there is that heightened competition will emerge from newly-harvested North American supplies later in the year.

Over the balance of 2010, the bank doesn't expect global wheat prices to firm, and so "any price rally should be viewed as possible selling opportunities," he said.