Close up image of green wheat head

Sowing is getting underway here, and this generally sees selling slow down as grain growers are busy on tractors rather than filling trucks with old season grain, or at the computer looking at new season prices. While there is nothing screaming sell at the moment, things are looking more positive.

Wheat prices seem to have found a floor and are heading in the right direction if you are a seller. Since moving into the lower $300/t range in our terms, CME Soft Red Wheat (SRW) has had a bounce, with new crop futures now at $340/t (figure 1).

The drivers of wheat market support are the wet weather in Europe, but this is only really offsetting continued good news on wheat crops coming out of the US and Russia. The pullback of corn acreage in the US, as Friday’s comment outlined, should add some support for the grain complex in general.

The average corn yield last year was 11t/ha, but the reduction in plantings is in marginal corn areas. Even if we use a yield of 8t/ha, the 2.55 million hectare reduction equates to 20 million tonnes.  The lower production is roughly double the Australian barley crop, and is a lot of grain.

Figure 1 shows local new crop prices are now moving in sync with US values.  Basis has remained steady around parity with SRW, with ASX futures currently sitting around $340-350/t. Basis around parity is consistent with a better than average crop, and recent rain through significant eastern cropping areas is likely to have helped confirm this view.

Canola prices have managed to hold on to the increases seen during March, both in international markets and locally. Slow, and eventually lower, expected sowing rates in Europe have given canola prices a boost, and our prices have tracked them closely.

Figure 2 shows canola values are still at the bottom of the three year range, but in the absence of a serious black swan event in the oilseed complex, it’s hard to see them heading back to the prices of 2022.     

Prices finding a floor is good for markets, but there is always a chance it could be a dead cat bounce. During good years prices tend to trend lower as the northern hemisphere harvest approaches, but there is still plenty which can go wrong between now and then.

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Key Points

• Wheat and canola prices have rallied from long term lows.

• Weather issues in Europe and lower corn plantings have provided support.

• If the season progresses normally prices will trend lower in the coming months.

Click on figure to expand

Data sources: Mecardo, Refinitiv

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