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Strap on: We are in for a ride 1

Strap on: We are in for a ride

Strap on: We are in for a ride 3‘A big crop gets bigger and a small crop gets smaller’. This seems to be an apt statement to apply to this year’s Australian production. Continued concerns in the east coast & now in WA have led to more positive price action in the past week.

The ASX wheat contract in the past has been quite illiquid, recent months has seen reasonable volumes move into the contract. The lack of grower forward selling due to drought (& frost) concerns. The contract is deliverable; therefore it provides an opportunity for consumers to have cover to meet requirements.

After a rapid rise through July and mid-August to $400-410, the market fell to $385. This dip was short lived, and in September continued dryness and frost in both sides of the continent have led to impressive gains. In the past week the price has risen $25/mt or 6% (figure 1).

At a physical pricing level the new crop multi-grade APW contract has seen a corresponding rise, however selling has been at low. Interestingly the market in Port Kembla, has seen a more sluggish (figure 2) rise than other east coast areas (Adelaide & Geelong).

What does it mean/next week?:

At present there are a high number of growers cutting grain and canola for hay. This leaves an interesting conundrum – will this increase in hay due to drought and frost lead to a downturn in hay prices?

One thing is for sure though, it’s time to strap on our helmets as its going to be a bumpy ride.