Back from the brink of ruin after years of drought, grain farmers are enjoying a great start to the season with a rare combination of steeply rising prices and a projected bumper crop.
Tracking steep rises in Chicago futures, Australian grain futures prices this week hit contract highs on the Australian Stock Exchange. "They're sensational prices," Garry Booth of Man Financial said of Australian wheat and barley futures.
"Superb prices, a superb season, it's almost too much to hope for," he said. With 70 percent of wheat and barley crops planted, forecasts are holding firm for a wheat crop up to the record of 26 million tonnes, and a big barley crop of around 10 million tonnes.
High prices and expected big tonnage's were an "extremely rare confluence" for Australian grain producers, Booth said. Australian growers in recent years failed to benefit from high prices because drought reduced the amount of grain for sale.
A steep rise in Chicago wheat futures over the past week to 11-year highs pushed January 2008 milling wheat futures on the Australian Stock Exchange up by A$8 a tonne to A$260 a tonne on Thursday.
The nearby July 2007 contract rose by A$7 to A$282. Feed barley rose by A$2 to A$244 a tonne for January 2008. Chicago wheat futures have been soaring on concerns about US harvest delays and tight world supplies, with shrinking tonnage's from Russia and Europe.
Australia, emerging from its worst drought in 100 years, has no such problem. Conditions are ideal for winter wheat in most parts of the eastern and southern states, although Western Australia is still dry. "Should they hold up into the harvest time there will be a lot of happy farmers around," said Booth of the lofty prices. With about 70 percent of winter crops now planted, how big could the crops be?
After forecast in March of 25 million tonnes for wheat, the government's Australian Bureau of Agricultural and Resource Economics will issue next week its first in-season crop forecast for the year to March 31, 2008. Australian Crop Forecasters, a private group, is already forecasting a 26 million tonnes wheat crop and 10 million tonne barley crop both nudging record levels.
Broker Rob Imran of Farmarco sees the potential for a 26 million tonne crop, but said Western Australia needs rain. "To get a big record crop you need essentially a big Western Australian crop and a big New South Wales crop. At the moment Western Australia needs a decent rainfall," he said.
Amendments to Australia's Wheat Marketing Act introduced to parliament this week should prevent any repetition of the Iraqi oil-for-food scandal, according to the Grains Council of Australia.
The government-appointed Wheat Export Authority is to be re-vamped into the Wheat Export Commission and empowered to request information and documents from organisations and individuals on operation of Australia's wheat export monopoly.
The commission will also be empowered to work with police and agencies if it discovers untoward conduct by wheat exporters. Exports in containers and bags will be de-regulated.
This trade presently accounts for only between 3 percent and 5 percent of Australia's wheat exports, but could deliver higher net returns to growers and was expected to grow significantly over the next harvest, Grains Council said.
The amendments follow a decision by the government to retain Australia's bulk wheat export monopoly, but to pass it from AWB Ltd to a new independent grower-owned body, possibly to AWB International, a hived-off subsidiary of AWB. An Australian inquiry finding that AWB broke United Nations sanctions against Iraq with secret payments to the Saddam Hussein regime to secure wheat sales triggered changes. The amendments are expected to be passed into law in August.