EASTERN Australia may be looking down the barrel of another El Nino, but for graingrowers fortunate enough to get a wheat crop through to harvest the prices are looking up.
In the past three weeks Australian Premium White (APW) wheat prices delivered Port Kembla have bounced $20 a tonne to $315/t.
Delta Ag grain marketer Elissa Strong, Lockhart, said the price increase reflected concerns about dry conditions locally and abroad.
"Prices have been improving due to worries about the Black Sea and Russia crops, and also wet conditions in parts of the US," she said.
Ms Strong said there was good basis in the local market.
"We are trading quite high over the international price," she said
"(Basis) at $58/t at Port Kembla is pretty high for this time of the year and is a reflection on our potential drought conditions."
GrainCorp media relations director Angus Trigg, Sydney, confirmed this sentiment.
"Prices are being supported by the uncertainty of the El Nino factor," Mr Trigg said
"It is all about rain at the right time, and a few local buyers are locking in domestic supply."
He said the possibility of below average Australian production was real and no doubt reflected in the current price rises.
Increased demand from feedlots had also caused stockfeed wheat prices to lift $5/t.
The strength of the US dollar against the Australian meant prices for Australian wheat rose by $20/t to $25/t above current US values.
M.C. Croker manager Tom Heggaton, Wagga Wagga, said domestic prices had been supported by the softening of Australian dollar against the US dollar during the past six months.
"Australian prices are being held up above global equivalents, indicating demand is currently higher than supply domestically," Mr Heggaton said.
He said the rally in the US was driven by the forecasts of a dry season in the Black Sea region, current seasonal conditions in the US where the southern grain growing regions was wet, and frosts and dry weather affect crops across the northern plains and into Canada.
Although the possibility of lower than normal supply from those countries was tempered by the potential of China to produce 125 to 130 million tonnes during the next season.
"This means they are not as actively participating in the global wheat trade," Mr Heggaton said.
Robinson Grain trader Robert Lean, Sydney, said the international weather reports were influencing the volatility of local prices.
"The speculative funds hold a record short position in Chicago futures which is increasing the volatility of each move and if there is to be a major global production issue the move would be explosive," Mr Lean said
He said the Australian old crop was struggling to get export sales at current prices with the exception of high protein grades.
"This will lead to increased carryover stock which could be as high as two million tonnes on the east coast... however the risk of El Nino is keeping Australian values strong," he said.
"Prices for the 2015-16 season APW1 wheat are in the top 10 percentile of prices during the past five years with $320/t basis at Port Kembla."
The stronger wheat price for the next harvest is reflected in the closing ASX January 18 contract at $321.50/t.
Crops still need rain at Uranquinty
FOUR millimetres of rain overnight is keeping the winter cereal crops grown by Trevor and James Petersen, "Killearn", Uranquinty, "just ticking over".
"Our crops are on par with last season, but there is a long way to go and I would like to see some decent rain soon," Trevor said.
He is pictured with his son James in a crop of Gregory wheat.
Sown on May 7 following 25mm rain during April, James said it had a good start and looked promising.
"We generally forward sell a proportion of our crop but this year we will hold off a bit because we are expecting higher grain prices towards the end of the year," James said.
He said because the dollar was good at the moment they had taken advice and locked in less than 10 per cent of their expected yield.
"And we see forward selling some of our crop as a mechanism for spreading our risk."
