AFTER periods over the last two years where Australian wheat has been the cheapest in the world by a considerable margin grain market analysts are predicting a return to more normal basis levels this season.
Rabobank grains and oilseeds analyst Dennis Voznesenski said after a couple of years of strongly negative basis, where Australian grain prices were markedly behind world parity, the likely different dynamics in production could see this changing in 2023.
"Already we've seen the basis evening up and it could even be a positive levels during the year, but because world prices are likely to be down on last year Australian farmers may not see much difference in the headline price," he said.
Andrew Whitelaw, Episode 3, said the low basis was a reflection of the big years and the difficulties of getting the grain out.
"The odds are we aren't likely to have a fourth consecutive wet year so the grain will be able to get out to the world market more easily."
Nick Orssich, StoneX Asia Pacific Ag vice-president, said basis levels hit about negative $200 a tonne for wheat at one point.
"It was virtually the perfect storm, we're very unlikely to see levels like that again, especially with a return to more normal production levels."
Mr Whitelaw also felt production levels would come back in line with longer term trends.
"The last few years do not represent the start of a 'new normal' in terms of Australian averaging over 30 million tonnes of wheat every year, a return to drier conditions will see production come back.
In regards to crop inputs he said a drop in nitrogen prices would prove a boon to growers should their crops be in a position to benefit from N applications in-crop this season.
World nitrogen prices have dropped nearly $1000 a tonne over the past six months in line with falling gas prices.
However, other prices for inputs such as fuel and crop protection products, while coming back slightly in price, have not declined to the same extent and will still represent a significant cost this season.
Internationally, Mr Voznesenski said there were fundamental, as well as trade, concerns about the Ukrainian crop.
"The focus has been on the ability of the Ukrainians to export, which is critical, but we also have to look at their ability to grow the grain in the first place.
"There has been markedly less land available for cropping due not only to the conflict but those farmers in relatively stable parts of the country not planting as much because of the high cost of exporting, there are fewer crop inputs available and labour is also difficult to find."
"Last year the crop was in before the conflict started so there is a chance we could see even lower production there again."
Mr Orssich said the composition of the North American wheat crop would be interesting for world supply and demand.
"There has been some useful rain in the eastern part of the US wheat belt, but the western wheat growing regions remain dry."
"The western areas are where the higher protein crops are grown so while there could be reasonable supplies of soft wheat out of the US there could remain a shortage of higher protein lines."
Further south he said Argentina remained in the middle of a horror drought, with last year's wheat production around half of the long-term average.
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