Australian Wheat Outlook 2017/18: The High-Stocks Game Continues
Rabobank expects Australian wheat prices to push into firmer territory over the next 12 months.
As the 2017/18 Australian season begins to play out, the world wheat stocks-to-use ratio has reached 33%. Much of the stock accumulation has occurred in China and should arguably be discounted when assessing the prospects for a global price recovery. In contrast, Ukrainian wheat stocks are very low, which will reduce export potential from this key competitor into South-East Asia in the coming season. Nonetheless, even after removing China from the equation, a relatively high stocks-to-use ratio weighs heavily across the world. Continuing high stocks-to-use ratios will dampen prospects for a significant recovery of global wheat prices in the coming season. Australian wheat prices are likely to gain support, following our expectation of a softening AUD/USD exchange rate.
Over the coming 12 months, Rabobank expects global prices to appreciate modestly, creating opportunity for the appreciation of Australian wheat prices. With an anticipated softening of the Australian dollar and decreased local new-season production, we expect Australian wheat prices to push into firmer territory over the next 12 months. Prices that deliver solid on-farm margins for wheat production in Australia are, however, expected only beyond 2017/18.
