CANBERRA: Prices of Australian grains and oilseeds will “remain well supported through 2015”, Rabobank said, citing the prospect of El Nino curtailing output at a time when inventories are already thin. Australian east coast wheat futures for July delivery closed in Sydney on Friday at Aus$305.00 a tonne, a four-month high and up 13.0% in a little over three weeks.
That is equivalent to $6.35 a bushel – a premium of 31% to July futures in Chicago, the world’s benchmark contract. Sydney’s better-traded January 2016 lot closed at Aus$309.00 a tonne, equivalent to $6.44 a bushel, a 28% premium to Chicago’s December 2015 lot.
The extent of the gap reflected fears over the threat of the El Nino weather pattern, which has returned for the first time in five years, and has a history of causing undue dryness in the eastern Australian grains.
“Heightened concerns of the impact of El Nino conditions on the 2015-16, as well as very limited forward selling… have resulted in local prices well above international values,” Rabobank said. And the elevated prices look like continuing, the group said, noting also relatively thin inventories for some crops, as Commonwealth Bank of Australia highlighted last week for feed grains.
“Australian grain and oilseeds prices are expected to remain well-supported through 2015, as low carry-in stocks – along with strong demand for feed grains – continues,” Rabobank said. The comments come as Australia’s farmers are sowing the key winter cereals crops amid concerns over a dearth of rainfall in many areas.
“There has been no significant rain for Queensland, northern New South Wales, South Australia or Western Australia, with Queensland and northern New South Wales needing it to continue their planting,” Pentag Nidera said.
“The concern over an El Nino event and its impact on the winter crop programme is growing every day.”The broker said that for central Queensland, where it is based, “without significant rain, it is difficult to envisage even an average wheat crop”.
Earlier in the week, Tobin Gorey at Commonwealth Bank of Australia, in Sydney, clocked a “sense that perhaps Australia’s east market is worried by crop prospects”.Talk with farmers had revealed a “slight drift in planting from wheat into barley”, which is a more dryness-tolerant crop.
