Australian cash wheat price falls to multi-year low on abundant supply outlook

30.08.2016

The cash price for Australian wheat fell to a fresh multi-year low of $205/mt FOB Western Australia for Australian Premium White Monday, as an anticipation of record supply for 2016-2017 (October-September) crop pressurized market outlook.

This is the lowest assessment since S&P Global Platts started assessing APW in November 2015.

"We have not seen such low pricing since [the] 2008-2009 record harvest [in] the low $200/mt FOB WA," an Australian trader said Monday.

Australian wheat production in 2016-2017 is expected to rise to a five-year high of 26.5 million mt amid favorable weather and soil conditions, according to estimates by the US Department of Agriculture in August.

In anticipation of higher wheat production, the main bulk handler in Western Australia, CBH is preparing for 400,000-500,000 mt of temporary storage to cater to an estimated 27 million-30 million mt wheat crop, according to local media.

Traders pegged possible carryout in Australia for 2016-2017 at 8 million-10 million mt, noting the erosion of market share in Indonesia and other Southeast Asian markets over the last two years due to unwillingness of Australian farmers to sell at the lower international price levels.

Over the last year, Australian wheat exporters have lost some of their market share in the Middle East and Southeast Asia -- mainly to Russia or Ukraine -- due to uncompetitive prices.

This led to weak sales volume in the first half of the year, and concerns of higher carryover stocks.

Offers for "new crop" Australian wheat exports were heard in the $203-$204/mt FOB WA range Monday for APW loading in December 2016 or January 2017, with buyers seen in the mid-$190s/mt, traders reported.

"We shall wait for January pricing from Ukraine or Russia to compare prices," said an Indonesian miller.

The lower Australian prices could possibly prompt Southeast Asian buyers to increase their procurement of Australian wheat, as the recent increase in freight rates and Black Sea wheat prices might edge out the competitiveness of Black Sea wheat, a Southeast Asian miller commented.


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