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Wheat Slump: Good Grain Crops, But World Prices Falling

31 October 2011

AUSTRALIA - As grain growers in the northern Victorian Mallee and Millewa prepare to harvest one of their best wheat crops in a decade in three or four weeks time, they are watching wheat prices slump on world markets.

"Good crop, crap price," was South Werrimull wheat farmer Ron Hards' blunt summary of the prospects for a big payday from the approaching harvest, writes Sunaysia Daily.

"Currently it's $220 a tonne for Australian Prime Wheat delivered to port, which means $170 or $180 per tonne for growers up here. That's less than we were paid last season for shot and sprung wheat for animal feed," he said.

Merrinee farmer Colin Hunt said he was hoping to begin harvesting his barley crop next week, followed by canola and wheat.

"The crop's looking OK, and after the fall this week, we've now had enough rain," Mr Hunt said.

"We'd like no more rain until the New Year."

Mr Hunt said many farmers were likely to warehouse their crops this season, in the hope that wheat prices improved.

Like dozens other first-timers in north-western Victoria, he capitalised on residual soil moisture from the heavy rain that ruined last year's huge grain crop to plant his first canola crop this year.

Canola prices are up around $500 per tonne.

While per-hectare yields are about half those of wheat, canola is potentially a more profitable crop, with its own residual benefit - it provides a disease break that can boost yields when it is rotated with wheat.

Mr Hunt said the high price of canola was a disincentive for growers to grow its more drought-tolerant oilseed cousin, Indian mustard, or juncea canola, whose oil is inedible, but can be converted to biodiesel fuel for trucks and farm machinery.

Mr Hunt says the experience of one Millewa grower who grew an experimental crop of Indian mustard two seasons ago, under contract to Melbourne-based Smorgon Biofuels, pointed to a looming problem developing a viable biodiesel industry.

"The farmer was contracted by Smorgons to grow Indian mustard, but when the price of canola went up to around $500 a tonne, the price of Indian mustard remained much lower."

According to Mr Hards, international commodity traders are driving down the price of wheat because they lack the confidence to buy wheat in advance during the current economic uncertainty in the European Union, with nations like Greece, Portugal, Ireland, Italy and Spain at risk of defaulting on their national debts.

Mr Hards, a veteran of the industry, and a long-time observer of the national wheat crop, says forecasts of a huge 26 million-tonne crop this year may also be contributing to lower wheat prices.

He dismissed the figure as "ridiculous".

"There are lots of pockets of good crops, but a lot are not up to scratch, or below average, and we need to keep a lid on forecasts.

"The crop could be 3 million tonnes short of the 26 million tonnes being forecast.

"I don't know where they're getting that figure. It's not as big a crop as last year, and we didn't get anywhere near 26 million tonnes last year."

Mr Hards believes grain protein content may also be below par this year, as a result of nitrogen loss through big crops taken off last year, and the effect of record rains leaching resdidual nitrogen deep into the soil profile.

Mr Hards also grew a canola crop this year.

"It looks pretty good - we haven't started harvesting it yet, but I'm confident it will go at least 800kg to the hectare.

He said he would check soil moisture after the harvest, and assess his prospects for growing another canola crop next year.

TheCropSite News Desk

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