AN INTERNATIONAL market awash with lower quality wheat paints a grim picture for Australian growers with either downgraded weather damaged wheat or low protein product.
The corn shortage in America during the year insulated feed wheat producers from the full brunt of the fall - however, with the USDA now estimating a record world wheat crop, end users are switching from corn to lower-priced feed wheat.
Large supplies of old and new season Australian feed wheat and grain out of the Black Sea region are placing downward pressure on lower protein values.
Many growers, especially in NSW where crops were not all harvested, are facing a worse year than in last year’s floods.
But it's not just weather damaged growers battling the pinch.
High yields have meant protein levels are low in many instances, and with an abundance of lower quality milling wheat about, the spread between ASW and feed wheat is zero at many sites.
This means growers in parts of southern NSW, Victoria and South Australia, while recording strong yields, are likely to also face lower gross margins than last year’s wet crop, where feed wheat sat at about double its current price.
"It’s a hot issue - we’re barely covering costs in the thinner crops," said VFF grains group vice president Peter Tuohey.
"Harvest this year has run a lot smoother and people are happy with the yields, which have been average to above average in parts of the State, but I’d have to say that particularly in the areas that didn’t get totally flooded out, margins were better last year than this year.
"Even though the wheat looked terrible (last year) the demand for feed grain kept prices up, whereas this year we have a better product, but there just isn’t the demand for it.
"The volume is there, so this would be a good year for the bulk handlers and freight businesses, but the farmers have got to move and store a lot of a low value product."
ProFarmer Grain senior commodity analyst Malcolm Bartholomaeus said his company was recommending growers sell off their high-protein wheat and warehouse low-protein wheat for up to three months.
"Spreads between hard and soft wheat have narrowed in recent weeks - I think we’ve seen the biggest gap, which is why we are recommending growers moving their hard wheats.
"Globally, stocks of high protein wheat are still reasonably tight, but within Australia, there is more hard wheat around than in many other years, in spite of there being a lot of ASW and APW as well.
"The volume of hard wheat would certainly still challenge what came in through Australia during the drought years."
Spreads between H2 and ASW are currently at between $50 and $60 a tonne.
At the other end of the milling wheat sector, analysts believe there is unlikely to be much of a premium above feed values.
"The world position for general milling wheat is strong - there’s a lot of it about so it's difficult to see a big premium for ASW over feed wheat," said Ron Storey, Storey Marketing Services.
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