July 14, 2011

 

International grain markets for Australian wheat rising

 

 

The international grain markets for Australian wheat have lifted after five weeks of consecutive falls.

 

Old-crop export values for AGP wheat rose AUD17 (US$18.24) and APW AUD7 (US$7.51) from last week's values.

 

Multigrade wheat contracts are AUD5 (US$5.37) higher over the week and reached AUD243 (US$260.79) delivered to the ports of Melbourne and Geelong earlier this week.

 

Export-based prices for F1 feed barley values have also responded well, with prices for July delivery AUD14 (US$15.02) higher at Geelong, AUD17 (US$18.24) at Portland, and AUD20 (US$21.46) higher for deliveries into Port Adelaide.

 

International investors have a greater sense of confidence as negotiations continue with the restructure of debt in Greece and Portugal, and riskier markets such as grain are now considered more attractive.

 

However, the key reason for the higher prices is linked to corn demand. Although the world supply of wheat is not in doubt at present, wheat prices have traded in sympathy to corn, and corn is priced at a historically high price relative to wheat.

 

As corn prices surge due to the world-wide shortage, more stocks of lower-quality wheat will be bought and fed to livestock.

 

In the past few weeks, China is rumoured to have bought between five and seven million tonnes of corn.

 

As the markets have been drifting lower, this corn has been purchased at relatively discounted prices, placing confidence in the market's ability to sustain these higher price levels.

 

Running counter to this bullish trend is the return of cheaper wheat and barley from Russia and Ukraine, attracting buyers of wheat who normally purchase Australian.

 

Russian politicians say they had sold as much as one million tonnes in the first five days of July following the lifting of their self-imposed export ban, and Jordan, Tunisia, and Egypt are reportedly buying or about to buy wheat from either Russia or the Ukraine.

 

Domestically, grain buyers are maintaining their prices at levels that attract sufficient grain to meet their needs.

 

In line with the easier markets of the past five weeks, SFW wheat delivered to Melbourne end users is AUD11 (US$11.81) lower this week at AUD202 (US$216.79) delivered.

 

The lift in agricultural commodities means that end users find the current price of grain affordable, but if buyers can achieve savings they will lower their prices in line with the easier export trends.