![Australian grain will compete against European and Russian product into key Asian markets. Photo by Gregor Heard. Australian grain will compete against European and Russian product into key Asian markets. Photo by Gregor Heard.](/images/transform/v1/crop/frm/5Q2j7ezUfQBfUJsaqK3gfB/bec85bf5-71ac-472f-934a-0518e1fb1d31.JPG/r0_307_6000_3694_w1200_h678_fmax.jpg)
The wheat market has given up much of its sharp gains in May in both US and French futures prices, however, there still remain concerns about global production.
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US futures have dipped as low as US620 cents a bushel after pushing through the US700c/bu mark early this month and French futures are at 238 euros, compared to a high of 269eur, but commentators have warned growers the critical grain filling period in the northern hemisphere would be full of volatility.
Australian values for old crop are around $370 a tonne for APW wheat (delivered port), with regional basis strongest in southern areas.
Globally, the market is digesting a vastly different set of circumstances than a year ago.
"It is the complete inverse of what we saw last year, we've got a markedly improved North American crop, with conditions in the US and to a lesser extent Canada much better than they were," said Lachstock Commodities chief executive Nick Carracher.
"On the other hand, we see western Europe too wet and complications with the crop in Russia and Ukraine, with the potential for further downgrades yet," he said.
"So while we are seeing the drop in the US futures reflective of that improvement there it is also important to keep a close eye on what is happening in Europe and the Black Sea as they are key competitors into the Asian markets where Australia is a big player."
Andrew Whitelaw, Episode 3 commodity analyst, said the market was in a classic northern hemisphere weather market at present.
"We saw those good opportunities present themselves earlier and now as there has been rain in parts that risk premium disappears," Mr Whitelaw said.
"Growers will need to continue to monitor the markets in the lead-up to the northern hemisphere harvest as things can move around quite quickly which presents windows of opportunity," he said.
Mr Carracher said the French crop continued to suffer with excess wet, which would not only cause yield, but quality issues.
"Barley is one that comes to mind immediately, this weather could really impact the amount of malt quality they produce."
Locally, he said conditions also had turned around year on year.
"It was a tough year for the north last year, this year it looks like it is the south struggling with a dry start, so we will have to look at the distribution of the where the grain is produced and what that will mean for export flows."
Mr Carracher said in spite of the price falls there was tightness in the world wheat market.
"We've had 25 million tonnes shaved off world estimates since their highs earlier in the year and in the key exporting nations there is a five million tonne year-on-year short fall which will come directly off exports, we might see demand rationing start to occur."