Global wheat could rally if weather risks realised

Global wheat prices could rally if weather risks in Australia and other major producing countries are realized, reducing expected global production, Australian marketing and logistics concern GrainCorp Ltd.reported Tuesday (September 1).

With a harvest of winter wheat drawing to a close in the Northern Hemisphere, the focus of the global market now is on potential quality issues for spring wheat crops in the US and Canada and on the development of Australian and Argentinean crops, GrainCorp reported in a brief weekly market review.

"The market is prone to a short-covering rally as discounted values don't reflect potential weather risks," the company reported.

Global economic uncertainty also remains an overriding negative in the market, it said.

In the US, Chicago Board of Trade December wheat rose 3.5 US cents to settle Monday at US$4.9875 a bushel, barely changed on week.

In Australia, wheat premiums continue to build in northern areas as dry weather raises concerns about yield prospects, GrainCorp reported.

Meanwhile, barley values weakened over the past week as rain in Victoria raised confidence that there will be an exportable surplus of feed and malt grades from a harvest late this calendar year in eastern Australia, it said.

If there is an excess available for export, local market prices should tend towards export parity, which is arguably some distance below current values. Large European export surpluses and cheap Black Sea barley hold export values low, and the strong Australian dollar widens the gap, it reported.