WHEAT prices have eased during November, and are now at their lowest levels since late September.
It is common to hear growers wondering whether the major grain traders operating in Australia are conspiring to push prices down just when they know growers want to make harvest sales.
In reality our prices are being pushed around by the broader influences of Chicago Board of Trade (CBOT) futures, and currency markets.
In fact weaker prices during our harvest period are relatively common, but we have just had three harvests in a row where harvest prices were higher than prices leading into harvest, and harvest prices peaked at attractive levels close to, or above $300 per tonne in export zones, and well above that where domestic basis was strong on the east coast.
This year’s prices, dropping below $270 per tonne in the Port Adelaide zone, and well under $300 per tonne in NSW and Victoria, are now delivering harvest prices lower than we have seen in six years out of the last eight seasons.
Only 2009 and 2011 delivered harvest prices lower than we are seeing this year in export based port zones.
Right now we are being caught with a surge in the value of the Australian dollar, and a slide in US futures.
None of these are under the control of the Australian grain trade.
Where the local trade do exert influence on prices being shown to growers is via basis.
The last peak in the market was on November 9, when Melbourne-based prices hit $303 per tonne.
With severe drought impacting Victoria, Melbourne-based prices are the strongest in the country this year.
In the two weeks since then, A$25.06 per tonne has been stripped from the value of CBOT December futures - $7.43 per tonne of that is related to currency, and $17.63 per tonne from losses in US futures.
Australian cash wheat prices are not likely to be able to hold against that sort of fall in US futures.
At the same time basis has lifted by $8 per tonne, to limit losses in our cash market to around $17 per tonne.
The traders in Australia are not passing on the decline in US futures in full, as they continue to compete for grower sales.
Where prices go from here will largely be determined by moves in currency and futures.
The charts show that the Australian dollar is nearing the top end of its trading range since late August.
If the US Federal Reserve raise interest rates in December, we could see a downward correction in our dollar, which will help boost our wheat prices.
US futures have just tested the October lows, with another 20 US cents a bushel to get down to the contract lows seen in September.
That remains a real possibility while we enter a period of the year where new fundamental news is hard to come by.
If we don’t get some relief from currency, or a rally in US futures soon, then the best chances for better wheat prices will shift to the first few months of 2016.
That will be when we rely on weather issues for the developing northern hemisphere crop to create uncertainly about global wheat supplies, which in turn would normally give a boost to futures until the risk as reduced.
Meanwhile stagnating prices, or a further slow grind lower, might be the lot we are dealt this harvest.
Malcolm Bartholomaeus is the market analyst for Bartholomaeus Consulting, Clare, South Australia.
