Singapore — Australian Premium White (APW) wheat hit $268.50/mt on Thursday, up a massive $13.50 day on day, and the highest since S&P Global Platts started assessing it in November 2015.
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The 6% day-on-day increase in APW prices came on the back of Bureau of Meteorology's August-October outlook released on Thursday, forecasting drier than average weather in most of mainland Australia.
"These forecast warmer and drier conditions suggest that much of eastern and southern mainland Australia are less likely to see widespread respite in the coming season from current dry conditions," the outlook said.
Traders said the persistent dryness in Queensland and New South Wales had impacted new crop prospects, with supply likely to be lower than last season's.
"BOM's latest climate outlook has triggered panic buying," said a trader based in Singapore.
Traded price level for APW in the domestic track market jumped by about $15/mt on the day for new crop, with a trade heard done at $271-$272/mt FOB Kwinana for 2,000-5,000 mt on Thursday.
Buyers in Australia have been bidding up for new crop throughout the week in an attempt to secure wheat supplies. But offers have been thin from farmers in Australia as they are reluctant to commit to further sales, lacking confidence on the new crop condition, sources said.
"They tend to sell in intervals based on the progress of crop condition. The price might be attractive now, but there is a great deal of risk involved in forward selling since the weather plays a crucial role till harvest," said a trader based in Australia.
The surge in US wheat futures, with the most active September contract rising 32.50 cents/bushel at market close on Wednesday, or up $11.94/mt on the day, also supported Australian wheat prices.
As a result of the recent price uptick, buyers in Asia have stepped to the sidelines, awaiting a clearer price direction in global wheat prices.
"Australia has been uncompetitive for several months and the current volatility is not helping. But Black Sea and US prices are also rising so we are waiting for a sign of relief," said a buyer source.
The spread between Platts APW and Black Sea 12.5% wheat has tightened to $40.75/mt on Wednesday, narrowing 41% since it hit a year-to-date high of $57.50/mt on June 15.
Australia is expected to produce 21 million mt of wheat for the new crop season (October-September), around the same as the previous harvest year, according to the US Department of Agriculture.
New crop planting typically begins in late April to early May and weather before harvest and during grain development is crucial.
Harvesting of wheat usually starts in September and carries on through January or February.
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--Edited by Jonathan Dart, firstname.lastname@example.org