Australian wheat prices to be higher than global prices

23.11.2018

The fortunes of US soybean growers and the US-China trade war could affect Australian wheat growers, according to the latest analysis.

Rabobank analyst Cheryl Kalisch Gordon said there was likely to be a lot more wheat being grown internationally next year, which could eventually weigh on Australian prices.

"Right now, the expectation is we'll find the reduction on global prices about 20 cents or 10 per cent from current levels," Ms Kalisch Gordon said.

"I expect it would be a bit softer than that for local prices, purely because we're looking into 2019 and not a great outlook for new season grain in 2019."

The US-China trade war could affect the Australian producers because US soybean farmers could grow more wheat.

China has slapped a 25 per cent tariff on imports of soybeans from the US, which has left the US farmers struggling to sell their product on the world stage.

"You've seen wheat prices move up 20 per cent over the past 12 months, you've seen soy bean prices move down about 15 per cent, so a lot of farmers will be looking at whether they can plant wheat next year, rather than soy beans," Ms Kalisch Gordon said.

"If an El Nino {weather pattern} does transpire — which for North America is a positive in their Great Plains area because it delivers more rain — that is going to be a burden on the global-wheat balance sheet."

Ms Gordon expects Australian wheat prices to be higher than international prices due to the drought.

Australia's total winter crop production in 2018-19 is forecast to fall by 12 per cent to 33.2 million tonnes, compared to 2017-18.

"This coming 12 months we would expect Australian grain prices to continue to trade well over the international prices, due almost entirely to the very tight balance sheet we have here in Australia," Ms Kalish Gordon said.


ABC
 

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