October 14, 2008


Australia's CBH raises specter of grain market defaults


The possibility of defaults and delays in payments has added to uncertainty in the global grain trade, driven by volatility in financial markets, according to Josh Roberts, a senior trading manager at Cooperative Bulk Handling Ltd.'s Grain Pool marketing unit.


Grain markets in Australia and abroad continue to be dominated by the fallout and uncertainty flowing from the global financial crisis, he said in a statement issued late Monday (October 13).


The fundamental influences of supply and demand remain sound, but are being overshadowed at least temporarily by the constriction of credit around the world, he said.


"Adding to the uncertainty is the specter of buyer defaults or requests for delayed shipment and/or payments by buyers hit by the falling market and scarcity of credit," Roberts said.


"The Canadian Wheat Board and other major players say they are not hearing about defaults but there are some reports of problems in the pulse and specialty crop markets," he said without providing further details.


Downtrends in prices in the US markets in recent weeks have weighed on most crops produced in Western Australia, including wheat, lupins and oats.


CBOT December wheat on Friday (October 17) hit its lowest price for a nearby contract on a monthly continuation chart since June 2007, but recovered a little Monday.


Wheat growers in Western Australia - where CBH operates - remain buffered to some extent from the global price drops by the weaker Australian dollar over the past three months and an easing in global ocean freight rates, he said.


As a result of the fall in global wheat prices, CBH's AgraCorp unit cut its estimated returns on collective pool sales for new crop benchmark Australian Premium White grade wheat of 10.5 protein to AUD340 (US$241) a tonne, down AUD42 (US$30) in the past two weeks.

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