Front page of business sector over the weekend in the West Australian. More newspieces like this and more investors start hounding for agricultural opportunities.
--------------------------------------------------- Grain prices soar on global harvest woes 26th August 2007, 9:00 WST
Wheat prices have broken through all-time record levels, fuelling concern consumers could soon be paying even more for bread, baked goods, beef, chicken, eggs, beer and a range of products exposed to grain prices.
The December wheat futures contract on the Chicago Board of Trade briefly hit $US7.54 a bushel ($337/ tonne) on Thursday, topping the previous all-time high of $US7.50 set in 1996, before closing up US7.25¢ at $US7.39.
The December contract, which coincides with the Australian harvest, has now jumped 70 per cent in the past year as production problems have struck most major wheat producing countries at a time when world stocks are at a 26-year low and the emerging biofuels industry has injected new demand.
Wheat exporter AWB this week raised its estimated pool return for this summer’s harvest by $30 a tonne, taking it to $300-a-tonne for the first time.
Prices for barley — a major livestock feed and a key ingredient in beer — also continue to break records.
Jason Craig, acting senior trading manager with WA grain group CBH, said yesterday forward cash prices for the coming barley harvest had swept to $325 a tonne for feed barley and $336 for malt barley this week.
That is a jump of nearly $20 since Tuesday and $70 in the past three weeks, mainly due to problems in Ukraine, a big supplier to Saudi Arabia, the world’s biggest feed barley importer.
“We have never seen prices like this,” Mr Craig said. “This is unknown territory.”
The latest rises have taken local prices far beyond the historically high returns paid to farmers last year as one of the worst droughts on record shrank the national harvest to less than half its average.
This time the market has largely been driven by international influences, including recent disruption to harvests in Europe, the US and Canada from rain and flooding.
But more recently it has also been driven by concern Australia’s oncepromising 2007 grain crop is deteriorating rapidly due to lack of rain.
The record prices in prospect for local farmers have also been helped by the fall in the Australia dollar over the past month from US88¢ to US82¢.
A spokesman for Goodman Fielder, Australian biggest bread and bakery goods maker, said it aimed to recover raw material cost rises from customers though there was usually a lag because of forward supply contracts.
Major rival George Weston Foods has just implemented a 2.8 per cent price rise this week, its third in about a year, blaming higher input costs.
But local growers have also been warned the current prices are unlikely to be sustained as northern hemisphere growers respond by potentially planting a record crop to wheat when they re-seed in coming months.
Outlying Chicago contracts point to a 20 per cent fall in the market midnext year to about $US5.80 a bushel when the next northern hemisphere harvest comes on stream.
But market analysts also say few local farmers are in a position to lock in high prices because of growing fears they may not harvest enough grain to match forward commitments.
Profarmer said many growers who used hedging instruments were actually staring down the barrel of hefty paper losses because they had already taken 2007-08 positions last year or early this year at what then looked like strong levels of $US4.50 to $US5.00 a bushel.
