AWB has raised its forecast wheat pool returns by up to $44 a tonne for 2010-11 reflecting the impact of drought and export bans in Russia.
AWB’s estimated pool return for benchmark grade APW wheat in the Western Pool is now $339 a tonne, up $44, ANW1 noodle wheat is now $354 a tonne, up $44, and APW wheat in the Eastern Pool is up $43, to a new EPR of $333 a tonne (FOB, excl GST).The move reflects drought-induced supply shortages in Russia as well as Kazakhstan and northern Europe, along with the Russian government's proposed ban on wheat exports for several months, AWB said in a statement today.
AWB's general manager commodities, Mitch Morison, said the jump in world wheat prices was all about supply and the uncertainty of what production will be available, plus the potential effect of intervention by governments to manage local supplies.
"The drought affecting Russia is widely known and the Russian Government has placed a ban on exports until December," Mr Morison said.
"The hot, dry weather is affecting a much wider area than Russia however, with yields affected in Kazakhstan, Ukraine, Germany, the United Kingdom, Poland, Hungary and northern France.
"This means a lot of uncertainty, which pushes prices up as buyers move to secure their supply lines.
"In addition to cash markets for physical wheat, futures markets have been particularly volatile, as fund managers balance their positions and respond to announcements from various governments in the region about what policies may be applied.
"To illustrate this point, following a series of upward moves earlier in the week, on Friday last week Paris wheat futures (MATIF) dropped sharply lower, after it was announced Kazakhstan and Ukraine don’t plan to suspend exports and Russia confirmed that despite their export ban, all existing contracts would be honoured.
"What this all means is that the world is now watching supply from other regions more closely: the US crop, which is part way through harvest, the Canadian crop, which got off to a bad start from excessive rain, Argentina, which has a much later season and is many months from harvest.
"For Australia it is known that while the season is strong in the east, Western Australia needs substantial rainfall, so this situation is also supporting prices and buyers will remain nervous until the picture for world supplies becomes clearer," Mr Morison said.
The development comes as wheat futures fell 6.4% today during Asian trade as investors scrambled to liquidate long positions and take profits amid hopes that Russia may ease its ban on grain exports.
The nearby September contract traded as low as $US6.8450/bushel, down US41.25 cents, erasing most of the gains made late last week.
The fall translates into about $A16.60 a tonne.
"Wheat was heavily overbought last week and it seems now some normalcy is being restored in price levels," said a grains trader in Tokyo.
The Russian Grain Union has requested the government to delay implementation of the ban to at least Sept. 1 so that some of the existing contracts can be implemented.
The Russian government has said that it may revise the ban, after assessing the size of grains harvesting, which is usually completed by early September.
Egypt, the world's largest wheat importer has suggested formation of a joint committee with Russia, to ensure rescheduling of the delivery of earlier purchases. Traders said Egypt has pending purchases of around 540,000 tonnes of wheat, yet to be delivered by Russia.
- with Dow Jones Newswires
