MELBOURNE, AUSTRALIA — AWB has reduced its forecast pool returns for 2010-11 season wheat, in response to the decline in wheat futures of recent weeks, the company announced on Oct. 6.
The reductions range from no change for top quality APH (14% protein), through to A$28 a tonne for feed wheat and other lower grades in the Eastern Pool.
AWB’s estimated pool return (EPR) for benchmark grade APW wheat in the Western Pool is now A$335 a tonne, down A$18, ANW1 noodle wheat is now A$365 a tonne, down A$18, and APW wheat in the Eastern Pool is A$327 a tonne, also down A$18 (FOB, excl GST).
AWB’s General Manager Commodities Mitch Morison said the market was now well back from its peak in early August, when concern about likely wheat availability from Canada and the Black Sea region drove prices to levels not seen since 2007.
"The market has traded the supply and demand story now — more is known about the overall wheat supply and the market has adjusted to the expectation that Russia will likely not export again until late in 2011. There is considerable supply entering the market from France and with the U.S. having had a good season and holding stocks from the year before, buyers are now slightly more comfortable," Morison said.
"In the absence of any new issues on supply to hold prices up, positional selling by fund managers has overtaken the futures market; it is generating greater volatility in wheat prices, speculative long wheat positions now appear much shorter and wheat prices have been pulled down significantly.
"Fortunately our early commitment program for pool tonnage has enabled us to commence our hedging program, which reduces the effect of this type of volatility on both wheat futures and currency.
"Currency volatility is an issue; the Australian dollar has traded in a two hundred point range since our last pool update and dropped around one hundred points straight after the RBA’s Oct. 5 interest rate announcement.
"The final point to note in our pool forecast revisions is the clear difference in world demand for high quality wheat, in comparison with much less interest on world markets for lower grades.
"There has been considerable rain on later harvested crops in northern Europe that has produced significant quantities of downgraded wheat, more than would normally be available. This is why our forecast prices for feed wheat have reduced so much.
"Higher grade wheat is still strongly in demand, thanks both to the damage in Europe and reduced supply from Canada, which is why our forecast at the top end of the quality spectrum is holding so well.
"With all these factors at work, AWB believes very strongly that wheat growers deserve realistic, regular assessments of the wheat market’s drivers, which is why we will be moving to weekly updates on our pool forecasts right through until the end of December."