Australian grain markets continued to grind lower last week, pressured by tumbling global wheat prices and export lukewarm demand.
ASX wheat futures for the nearby contract finished the week $9 lower at $326 a tonne, the lowest in 31 months. ASX wheat has fallen by around $60 a tonne since the end of last year. It's unclear if the price rout is over.
Analysts are pinpointing the decline in local markets to sliding Black Sea wheat values and an accompanying softer than normal appetite for Australia wheat from core Asian markets.
Falling prices in the world's largest wheat export country, Russia, are pressuring global wheat prices and limiting concerns over weather risks in the approaching northern hemisphere harvest. Sharp declines in Australian wheat values mirror similar falls in Russia's export prices.
Russian exporters have lost market share to cheaper supplies from Ukraine in recent months through its 'go-it-alone' export corridor that hugs the Black Sea coast. Ukraine is reporting its monthly grain shipping volumes are now approaching pre-war levels as global buyers assume increased shipping risks for cheaper prices.
Australian wheat exporters are saying the promise of cheaper Black Sea wheat supplies has made it difficult to make sales into core Asian and Middle East markets. Australia's wheat exports to core destinations, including China and Indonesia, for the first three months of the 2023/24 marketing year are sharply lower than last year, as buyers respond to the cheaper Black Sea prices.
In the meantime, farmer selling has slowed dramatically with the sharp decline in prices. Farmers are saying that current prices of $330 to $340 port for APW are back to levels which don't cover production costs.
Attention has also swung to the autumn weather where farmers are looking for rain to seed the 2024 winter crops in the next eight to 12 weeks.
The wetter than normal summer has been conducive for sorghum and cotton crops, but top-up rain is needed to plant winter crops. More substantial rain is needed in the southern cropping zones which turned drier again in February.
In its latest climate outlook statement, Australia's Bureau of Meteorology said it was likely to be a drier than normal autumn. It said there was a 60-75pc chance of below normal rainfall for NSW, Queensland, and Victoria from March to May.
