National Australian Bank releases a warning on wheat prices, as an El Nino Threatens Australian Farm

Wheat Prices

The National Australian Bank released a statement that Wheat prices will struggle this year because of a possible occurrence of an El Nino that loom the Australian Farming industry. The El Nino will bring a sharp decline in the next harvest.

Although there have been some modest downgrades to estimates for this year’s black sea harvests, following the dropping temperature which threatens autumn-planted crops, and the U.S. sowings have fallen to the lowest in more than a century, the NAB stated that “It will remain unlikely that the dollar price of wheat will rise significantly this year.”

The National Australian Bank agribusiness economist Phin Ziebell added that “Ultimately, it's hard for prices to rise when, globally, production is rising more than consumption.”

The comments amid some debate in grain markets as to whether declining market in Chicago wheat futures which is the world benchmark, is showing signs of exhaustion, after almost nine years.

There are assumptions that if prices will fall further, the market may have a hard time to bounce back, that hedge funds into a wave of short-covering which in the latest week saw them half the net position in Chicago wheat futures and options to some 40,000 contracts, the lowest in 15 months.

The bank has seen Australian wheat prices showing some outperformance to rise by 12% at the end of this year which is slightly bigger than the 9.0% improvement that is factored in by investors.


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