Fears about tensions in Ukraine have been well allayed, with booming wheat production from the Black Sea region and elsewhere in Europe weighing on Australia’s sixth biggest export.
The price of wheat has crashed 31 per cent since May to a four-year low. It was hit hard last week losing about 4 per cent over Thursday and Friday, following weaker-than-expected US export numbers.
ANZ analyst Paul Deane said the US sold 315 thousand tonnes of grain in last week, less than half of the previous week’s sales number.
He said sugar, which has fallen about 25 per cent since mid-year, almost mirrored the decline in wheat, plunging 1.8 per cent on Thursday, as markets continue to be sensitive to excess global supply.
Rabobank grains analyst Graydon Chong said the American market, which in turn was weighing on Australian prices, was coming under pressure from increased supplies in Europe and the Black Sea region.
“A lot of that supply into … the North African, Middle Eastern markets come out of Europe. The last Egyptian tender was won by French wheat, significantly below the market,” Mr Chong said.
“We’ve obviously had Black Sea markets working into that region as well. They have got big suppliers coming on board which aren’t from the US and as a result we’ve seen the US market trend lower to try to find some traction or find some demand.”
This was not being helped by near perfect conditions fuelling record harvests in America and elsewhere in northern hemisphere.
It was initially feared the poor weather in the US and the Ukraine-Russian tensions, which erupted in February, would curb production but those concerns failed to eventuate.
“Ukraine really didn’t have a big impact on commodity markets. It might have held up things a little bit but we have still seen the market being able to trend lower throughout the crisis that we’ve seen over there,” Mr Chong said.
“The flow of grain certainly wasn’t majorly disrupted by the issues that we had in that region.
Mr Chong said the latest official figures from the US had estimated that world wheat production has surge by 8 million tonnes, and demand was struggling to keep up.
“Global consumption was up by about 3.2 million tonnes, most of that being in China. I guess that, all in all, paints a pretty bearish story for wheat.”
He expected prices to remain soft until the start of next year, saying “by which time we will see more some demand come back into the markets and the big crops that we have seen this year might not be as big next year”.
Wheat is not the only crop that has been hammered. The price of corn has fallen about 28 per cent in the past six weeks, while canola has dropped 19.3 per cent since late June.
Soybeans meanwhile have slipped 39 per cent.
Mr Chong attributed the falls in those prices to oversupply.
“I think we’re projected for our second highest canola production here in Australia, which has kept a little bit of pressure on domestic prices.
“But we have also seen large crops out of Canada and the [European Union] as well. That’s why we have seen prices come off so far this year for Australian prices.
“At the same time it’s being pressured by the outside oilseeds complex. The fact that soybeans are so bearish is impacting canola prices as well.”
(Source – http://www.blackseagrain.net/novosti/australian-wheat-exports-feeling-pressure)