May 27, 2010

West Australian wheat price rallies

Wheat has started to rally after months of disappointing prices, amid a falling Australian dollar.

In the past month, the Australian dollar has fallen about AUD 0.10 (US$0.08) against the greenback. While it is bad news for investors, it is good news for local grain growers.

Most of Western Australia's wheat is grown for the export market and traded in US dollars. Commodity trader Tonney Smith said a 10% drop in the dollar means a 10% increase in wheat prices.

"In the last two weeks we've seen a big movement in grain, so it's either old stock that's being sold and moved or it's people pricing forward for next season," he said.

However, Mr Smith said prices have only risen on the back of a falling Australian dollar, and he warns there is still a global oversupply of wheat.