Wheat spoiled by heavy rainfall
Asa Wahlquist, Rural writer | December 08, 2008
Article from: The Australian
TWO weeks of rain over the northern NSW grain belt have wiped hundreds of millions of dollars off the value of the wheat crop.
"Northern NSW was looking at one of the better crops it has had in a long time," said AWB general manager of Australian commodities, Stuart Richardson.
"Then, all of a sudden, you have downgrading. It is the worst possible scenario, and it is not just NSW. There are areas of Western Australia that have copped it."
Rain-affected wheat can begin to shoot, seriously affecting the quality. The upside is prices for those with good-quality grain are rising.
AWB bumped up the price of durum wheat by $90 a tonne last week. AWB's pool price for east coast durum wheat now stands at $550 a tonne, compared with the benchmark APW Australian Premium White wheat on $325 a tonne.
The rain-damaged durum wheat is likely to end up as feed wheat, worth around $235 a tonne.
Mr Richardson said drought in South Australia and flooding rain in northern NSW hit the two durum production areas. Durum wheat is used to make pasta.
Mr Richardson said the amount of durum grown over the past 10 years had varied from "anything up to one million tonnes and as low as a couple of hundred thousand tonnes".
"It is really hard to tell this year what the production is going to be because of the extreme weather conditions, but it is not that much," he said.
Heavy rain has also fallen in southern parts of WA's grain belt. "Normally they are hot and dry and they don't have problems," he said.
Mark Martin, principal at MarketAg, an agricultural marketing consultancy based in northern NSW, said the niche grain crops had borne the brunt of the rain.
Typically, Australia exports durum wheat, but the looming shortfall this week pushed the price up close to import parity.
"We have growers who were looking at prices only three or four weeks ago of around $380 (per tonne) delivered Newcastle, yesterday being paid $520 delivered Newcastle," Mr Martin said.
"Currently durum is commanding a premium above bread wheat of about $200 a tonne; last year it was $300 a tonne, and the year before it was only running at about $30 above bread wheat.
"Because durum is such a small niche market, any supply shift either up or down affects the price fairly quickly.
"A lot of the guys who grew bread wheat are shaking their heads and saying 'why didn't I grow durum?"'
The listed soft commodity company PrimeAg reported its 15,200ha winter crop had been affected by the rains.
Executive chairman Peter Corish said "we are seeing evidence of yield loss and quality downgrade on the unharvested portion". The preliminary estimate is a 10 to 20 per cent reduction in winter crop revenue.
But Mr Corish said the rains were good for sorghum and cotton, and more summer crops would be planted on the extra irrigation water they now had.
Mr Martin argues prices for good milling grain are going to rise. He believes agricultural commodities will lead a resurgence in commodity prices next year.
"The metals and all the other hard commodities could languish for some time, but watch the ag commodities," Mr Martin said. "They will take off next year."
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