Australia slashed expectations for wheat shipments next season, citing “large exportable supplies” from competitive origins, even as Cargill braced farmers for cuts of some 10% in payouts on the grain.
Abares ditched expectations of a revival in Australian wheat exports in 2015-16, on a July-to-June basis, cutting its forecast by 1.5m tonnes to 16.5m tonnes – a figure in line with volumes expected this season.
The downgrade followed a cut last week by Abares, the official Australian commodities bureau, to its forecast for domestic wheat production in 2015-16, citing a switch by farmers to crops offering higher returns, and noting the threat of El Nino producing unduly dry conditions in the eastern grain belt.
However, the bureau also flagged the growing competitiveness of grain from rival origins, notably the US, for which it slashed price expectations for hard red winter wheat values next season, as measured in Gulf ports, by $35 a tonne to $230 a tonne, equivalent to $6.26 a bushel.
The hard red winter wheat price average for 2014-15 in Gulf ports was pegged at $266 a tonne.
“Australian exports are expected to face increased competition in some of the key markets in East Asia from an expected increase in US exports, albeit from a 12-year low in 2014–15,” Abares said.
It pegged US exports at 25m tonnes in 2015-16, up 2m tonnes year on year.
Meanwhile, trade volumes will come under pressure from strong harvests in some importing countries.
“Exports to the Middle East and North Africa are expected to be lower as a result of reduced import demand in these regions and continuing large exportable supplies in the Black Sea region and the European Union.”
Australia’s prices will also come under some pressure, falling to Aus$304 a tonne, as measured by the return farmers could expect from a wheat pool for benchmark APW (Australian premium white) grain.
In 2014-15, the average was Aus$319 a tonne, on Abares estimates.
In fact, Cargill’s Melbourne-based AWB grain trading operation forecast the potential for even bigger price falls for its pools for next season, which it kicked off with estimated returns of Aus$285-320 a tonne, down from Aus$314-355 a tonne for 2014-15.
“Currently international wheat values remain under pressure with high global supplies and limited customer demand,” said Charlie Brown, portfolio manager at AWB.
“This paints a bearish outlook for global wheat prices through 2015 and into 2016,” he said.
However, prices were likely to experience volatility, given factors such as currency moves, although as for the El Nino, he said that “independent forecasters [are] anticipating an average Australian wheat crop despite… [the] weather pattern”, which is linked to dryness in eastern Australia.
“It’s fair to expect some price pressure on the domestic wheat market once the size of the Australian crop is known,” he added.
(Source – http://www.agrimoney.com/news/australia-cuts-wheat-export-hopes-citing-us-competition–8460.html)