December 22, 2008


Australia's January wheat flat; market stalemate



Australian wheat futures were little changed Monday (December 22) despite a modest easing Friday in prices in the US - usually a primary driver of Australian values.


Australia's most active contract - ASX January - was quoted unchanged at A$262 a tonne, despite Chicago Board of Trade March wheat losing 8.25 US cents Friday to close at US$5.6325 a bushel, up 30.25 US cents on week.


While CBOT wheat posted a reasonable gain last week, ASX January continues to hover around the A$260 level.


"Australian wheat is losing value because international markets are going up and domestically, it isn't really going up with it, so the basis gets weaker," said Andrew Woodhouse, a risk management consultant at Advance Trading Australia Pty Ltd.


He believes there is something of a stalemate in the market with end-users and wheat merchants sitting on their hands and not wanting to pay up for wheat while growers are still warehousing a high proportion of their wheat before allocating it to a collective sales pool or selling it for cash, possibly early in the new year.


Some forces are at work though to potentially shift this balance, he said, citing the delivery period to start on ASX January wheat, which could spark a buyback of previously sold positions, plus demand for wheat for export.


GrainCorp Ltd has more than 350,000 tonnes of wheat scheduled to be exported by late January from its monopoly export terminals on the east coast.


It may be that merchant demand will increase to fill shipping commitments but the trade doesn't know this yet, he said, adding that much of the wheat in the storage system in southern New South Wales is high protein, high quality milling wheat.


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