WA Wheat farmers warned of lower prices
An international grain forecasting expert has warned WA’s farmers they should not expect higher global wheat prices any time soon.
Australian grain growers should watch the Australian dollar closely, as this would have the biggest bearing on their prices next season and beyond.
Chicago-based AgResource Company president Dan Basse said a number of headwinds meant global wheat prices could decline to a seasonal low this year of about $US165-$US172 tonne — presenting about $US30 downside risk.
Record stocks of 546 million tonnes of major grains (wheat/corn/soybeans) meant the world was “awash with grain”. Global plantings were at a record high. The global area harvested last year was 523 million hectares.
Mr Basse, visiting Perth last week as part of Rabobank’s visiting experts program, said a massive expansion in plantings in Ukraine, Russia, Brazil and Argentina, was contributing to the oversupply.Russia, once the biggest importer of wheat was establishing itself as the world’s biggest exporter and had another 12 million hectares that could be cultivated.
Russian farmers were also adopting technology and getting big increases in yield, he said.
“The world price of wheat is no longer determined in Chicago but by the Black Sea — it is now the key location,” Mr Basse said.
On the demand side, Mr Basse said world wheat trade remained flat, needing just 1.8 per cent more grain each year to meet expanding caloric intake.
“An increase in world crop trend yields can meet this demand without additional cultivated acres,” he said.
Mr Basse said demand for biofuels had matured, so future growth in demand for grain would come from expanding world livestock herds or new policy direction.
Such increased demand from expanding livestock herds might come from Africa or India as China was self-sufficient in grain. In 2014/15, China imported 31 million tonnes of grain but could be exporting corn by 2018/19, Mr Basse said.
An advantage for Australian farmers in the short term was the ability to produce higher protein wheat, which had led to better pricing amid a global shortage.
“Traders and importers are loving the quality wheat that comes from Australia,” he said.
However this shortage was expected to be alleviated when the northern hemisphere crop was harvested in June.
Mr Basse said Australian prices would be dictated largely by the value of Australian dollar.
A 24 per cent fall against the US dollar over the past three years had helped underpin Australian grain grower revenues and incomes.
With further depreciation expected, this would be key to supporting future prices for Australian farmers.