NATIONAL Australia Bank is forecasting a jump in local wheat prices on the back of a poor sorghum harvest in northern Australia.The forecast comes as the Australian Bureau of Agricultural and Resource Economics and Sciences slashed its estimate of the sorghum crop by 700,000 tonnes to 1.7 million tonnes.
Sorghum production has been set back by hot conditions over summer, with the recent tropical rainstorms too late to save much of the crop.
NAB Agribusiness commodities director Tim Glass said the shortage of sorghum was likely to trigger a run on feed wheat as a substitute, pushing up wheat prices in general.
Mr Glass said there was a window of opportunity for growers interested in selling grain carried from last harvest or hedging some of the coming winter crop.
"There's a sweet spot at $280 - $330 a tonne (at port) where hedging is a real option for many growers, depending on their costs of production," he said.
"There's also been a rally in the domestic premium over the past few weeks for grain from the last harvest, which is creating some strong selling interest.
"The likely impact of the hot summer on the sorghum crop, combined with last year’s smaller barley crop in the north, means feed grain stocks are dwindling and heavy usage areas like the Darling Downs and the Goulburn Valley will be drawing grain out of NSW.
"This is expected to support prices over the next couple of weeks while northern hemisphere crops are still in 'freeze' and there's little information available about the likely harvest potential just yet."
Mr Glass said the widespread rain and flooding across much of the east coast was unlikely to impact on the the price window.
"As the dormancy period in the northern hemisphere ends, there will be growing certainty about likely planting levels in Australia, and therefore markets are likely to become more volatile – both up and down," he said.