For the first time in a very long time US wheat is price competitive.
- Charlie Brown, AWB
WHEAT values last week made their largest jump yet off decade lows set in the past two months.
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There has been a sharp rally in Chicago Board of Trade December wheat futures, from below US400 cents a bushel to US421c/bu on Monday, a lift of more than five per cent.
The price jump has spilt over into a rise in Australian wheat values, with ASX January wheat futures for the east coast contract hitting $240 a tonne before falling to $238/t on Monday.
The $240/t was the highest price offered since mid-August.
Analysts said the price had to lift off the extreme low values and that there is some positive news for the market but warned the glut of stocks internationally still weighed heavily on the wheat sector.
“It was always going to bottom out at some stage,” said Malcolm Bartholomaeus, Bartholomaeus Consulting.
“American wheat is now very competitive into global markets and that has been reflected in sales into both North Africa and the Mediterranean.
“That has in turn boosted exports, which obviously is supportive for pricing.”
Charlie Brown, AWB pool manager, said US prices have fallen to levels where US wheat can compete against cheaper origins.
“For the first time in a very long time US wheat is price competitive, and that means the export data is positive.”
Mr Brown said the challenge would be in maintaining this competitiveness factoring in the market rise.
“We saw the US miss out on a Saudi Arabian tender recently, so it only took a small rally and US wheat didn’t get in, so that shows the challenges in seeing this rally push any higher.”
However, he said there was good news for wheat producers in that the rally seemed to signify the seasonal low in the market.
“The good news is that the market seems to have bottomed out, whereas a few weeks ago we were looking closely at whether prices could drop further again.”
Mr Bartholomaeus said while there was a lot of wheat across the globe, stocks were running down in all nations but the US and China.
“There are some interesting signs behind the headline number, but equally there is still a lot of wheat around,” he said.
Hamish Allerton, market analyst with Rabobank, said technical factors were also an influence on the price rise.
