February 2, 2015

Australian wheat prices fall amidst lower production forecasts in 2015

Australian wheat has become more competitive after prices fell last week due to weak demand and falling global prices, traders said.

This development came in the wake of forecasts by the US Department of Agriculture that this year Australian wheat production is expected to decline by 14% to 23.2 million tonnes because of below-average rainfall and falling yields and despite a 2% increase in total harvested wheat area, to 13.8 million hectares.

Australian prime wheat was quoted at $272 a tonne into Southeast Asia, including cost and freight. Standard wheat was priced at around $265 and high-protein hard wheat at $310, in each case lower by around $15 a tonne from the week before, the news agency Reuters said.

"We are expecting Australian wheat to start becoming competitive with the fall in prices this week," a Singapore-based trader was quoted as saying last Friday.

While sufficient stocks of wheat from the 2014 season are available to meet export commitments, Australian exports are forecast to fall to 17 million tonnes this year, down 8% from the previous year due to lower production and yields, the USDA report, released last week, said.

The report added that the average export price for Australian wheat is expected to fall this year, although this will be offset by the depreciation of the Australian dollar seen in early 2015.

Australia is the seventh-largest wheat producer in the world and the fourth-largest exporter, according to the USDA.

Around 80% of Australian wheat production is exported, it added.

Of the 5 million tonnes of wheat that Australia consumes annually, some 2.5 million to 3 million tonnes is used as stock feed.