THE LEADER of Australia's grain trade peak body has hosed down suggestions from the grain grower sector that Australian cash prices are too low.
Grain Trade Australia chief executive Pat O'Shannassy said that comparing Australian cash prices against US wheat futures, which have created headlines after smashing records in recent months, was not an accurate reflection.
"The rally and extreme volatility in US futures markets induced by a combination of already tight global exporter wheat ending stocks, and the Ukraine conflict, can be viewed as a 'liquidity squeeze'," Mr O'Shannassy said.
"At times of extreme volatility in a futures market the underlying supply and demand factors of the physical markets, lose relevance, therefore the US futures prices, for periods of time, are not as relevant to global physical markets and do not fully reflect them."
Mr O'Shannassy also said much of the exports currently being executed through Australian grain ports was for sales negotiated some time ago.
"The carryover stock position prior to the large 2021/2022 crop combined with the strong global demand for Australian grain and, large volumes of pre-harvest and harvest selling of the crop by producers, has meant export sales have been locked-in and current and forward shipping capacity is heavily committed."
And he said this tightness of export capacity meant grain traders would only have limited opportunities to enter the market and negotiate old crop business at current higher values.
"It is notable the Australian bulk grain shipping levels are well ahead of the previous record for the first six months of the shipping year, therefore, there is limited or marginal capacity available for additional sales to capture current global market values resulting from the conflict in Ukraine."
Mr O'Shannassy said the current Australian crop was smashing records and it was tough for the export supply chain to keep up.
"What we can see is that it has been an exceptional season of production and means the grain supply chain is working hard to move and export significantly more grain than ever before."
"There is no historical precedence for this volume moving through the Australian grain supply chain."
He said given Australia's notoriously fickle climate it was not a simple case of investors putting up more port capacity.
"We should not forget that a significant amount of this supply chain capacity is idle or underutilised during droughts and lower production years, meaning supply chain operators and investors have been required to consider an appropriate balance in capacity utilisation."
Mr O'Shannassy said data showed prices were at strong levels considering the big production locally.
"Profarmer Australia data shows Australian wheat cash bids across various port zones are currently around decile 8 or 9 levels, which is very high by historic standards, effectively at price levels usually seen during low production years, rather than big production years."
He said it was hard to compare the season to others before due to the size of the export program, but added competition for Australian growers' grain from both exporters and domestic consumers remained strong.
Looking forward he said the Ukraine conflict was likely to continue to be a major driver on world markets, although he said Australia would face competition from other origins also looking to fill the void.
While he said there were issues in big exporters such as the US and the EU that may keep export volumes down he said other alternatives such as Argentina or India could step up.
In terms of Australia's ability to secure more customers, he said the sector was unlikely to be able to ramp up production further.
"The ability for Australian grain producers to fully compensate the potential Black Sea shortfall may be limited."
"Australian acreage is at record levels, and high livestock returns are reducing incentive to switch to cropping."
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