Growth, inflation and labour market all easing
China’s strong import program is one of several global factors colliding to underpin wheat prices through the end of the year and into 2013, according to the latest Rural Commodities Wrap, which this month focuses on wheat. NAB estimates the crop will come in at 20.6 million tonnes
China’s strong import program is one of several global factors colliding to underpin wheat prices through the end of the year and into 2013, according to the latest Rural Commodities Wrap, which this month focuses on wheat.
NAB Agribusiness General Manager, Khan Horne, says with the harvest now underway across the country, NAB estimates the crop will come in at 20.6 million tonnes. “Australian growers have managed the challenges of the season well and although production is down, high prices are helping to buoy the industry,” said Mr Horne.
“Looking globally, Chinese wheat imports were up 196 per cent year-on-year in September, due to domestic production concerns.
“On top of that, droughts across the northern hemisphere have decimated crops through the United States (US), large chunks of Europe and the Black Sea, resulting in a sizeable shift in prices.” A weaker than expected US export program had managed to soften prices through October. However, with export bans in the Ukraine and high Russian prices, importers are likely to shift back towards more expensive US wheat in the coming months.
In conjunction with concerns surrounding South American corn and soybean planting, prices should remain stable through late 2012 and into 2013, with risk very much skewed to the upside.
However, Mr Horne said Australia first needs to see the outcome of the southern hemisphere harvest. “The Australian wheat crop has not been immune to its own issues,” said Mr Horne. “In speaking to growers across the country it was clear that below average winter rainfall left many looking to decent falls in spring to replenish subsoil moisture levels. However, October was generally disappointing and as a result yields are down.”
The wheat crop is down 30 per cent on last year’s record of 29.5 million tonnes and slightly below the decade average of 21.1 million tonnes. However, Australian growers have benefited from the tight global market. Australian prices are up more than 22 per cent since June, and the gross value of the current harvest is estimated to come in at around $7 billion.
The impact of the northern hemisphere droughts has also been felt in Australian feed grain prices, with the NAB Weighted Feed Grains Price increasing 4.7 per cent in September, to be almost 20 per cent higher over the year. At $285.30/t, the NAB Feed Grains Price sits at its highest level since October 2008.
Across other commodities, the NAB Rural Commodity Index was up 3.5 per cent in September in AUD terms. Despite the headline result commodity prices were very mixed through the month. Supporting the index, dairy prices were up significantly while barley, wool and wheat recorded more modest price increases. Cotton prices were broadly flat, while price falls were recorded for beef, lamb and sugar.
Looking ahead, NAB expects the Index to strengthen in the coming months as dairy continues to recover while meat prices are likely to have bottomed out.
For further analysis download the full report.
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