GROWERS in the Esperance region are questioning the reason for a significant price gap between APW2 in their zone compared to Albany and Kwinana Zones.
In some instances they have been awarded up to $38 a tonne less than growers in the Albany and Kwinana zones and want to know why.
As old crop APW2 fell between $10/t and $15/t last week across all the zones, analysts and CBH blamed merchant liquidity as the culprit.
A CBH spokesperson said Esperance was a bulk shipment port and at some point in the trading calendar a trader would consider its current accumulation performance and make an assessment on their ability to complete a vessel accumulation.
If its accumulation had been unsuccessful and it hadn't been competitive at the grower level, then the trader would withdraw its bid from the market, not wanting to part-own an accumulation for an indefinite period of time.
The spokesperson didn't deny the price spread and said the gap had widened because wheat values in Esperance had been reflective of Panamax cargo valuations into the Middle East.
He said as CBH moved forward in the accumulation profile, the destination market had shifted to Handy Size cargo into South East Asia, which traded at a discount due to competition and the quality consumed in the Asian nations.
But growers still wanted to know where the $38/t had gone and whether they could trust the right thing was being done with this money.
"The relative value of Esperance competes not only with values from other port zones in WA but also from South Australia," the CBH spokesperson said.
"The projected 2010/11 wheat production from South Australia is 5.60mt, plus 38.2 per cent year-on-year (YoY), a substantial increase which results in South Australia trading at least $5/t lower than WA."
The Kwinana Port Zone is the largest wheat production zone in WA and provides bulk and container export capacity.
The CBH spokesperson said as a result it attracted a wider spread of competitors, most of which preferred to trade a single port zone to simplify their preferred accumulation as opposed to CBH who was committed to marketing all grades of wheat produced throughout all zones within WA.
"Production impacts across the zones had a huge impact on port spreads this year," the spokesperson said.
"Our internal estimate for wheat is a 49.4pc reduction YoY with Kwinana down 61.6pc versus Esperance at -5.7pc.
"Our spread for APW in Kwinana versus Esperance has been about +$30."
CBH said it hadn't anti-nominated one zone over, or at the expense of another but made a market and had a bid in each zone for all grades.
It said the bid reflected the sum of what it took to accumulate for bulk shipment to the destination market which had shown the best value for that particular quality of wheat.
CBH's head of trading Don Campbell said the CBH trading team were committed to making a market in all zones across all grades.
"Further to that, we are committed to discovering value and reflecting that value from market signals," he said.
But that wasn't enough to satisfy Esperance Zone growers like Colin de Grussa at Gibson.
He said Esperance Zone growers had been told a lot of different reasons for not receiving the same premium for their APW2 as Albany and Kwinana Zone growers.
He said the most recent story doing the rounds was that the quality of grain in the Esperance Zone wasn't of the same quality as that further west.
"The perception is there," he said.
"We've heard so many different stories down here that it's not funny.
"It has also been suggested that freight costs have caused the difference and that the Esperance Zone doesn't have the amount of grades on hand as the other zones.
"But that's a cop out.
"It does make sense that it would depend on how many bidders there are in the market and the amount of shipping slots available but $38 a tonne is a huge gap and it's not on.
"We also seem to be in a bit of competition with South Australia down at Esperance.
"There was a $90 to $100/t export parity with malt barley varieties so I'm not sure how, or if, that kind of scenario reflects on our wheat market."
If another merchant developed a short position in Esperance wheat prices would likely move again and it had already been witnessed in the case of some non-milling grades like AGP1.
It was reported CBH would control 85pc of shipments leaving WA between mid-April and May this year.
New shipping announcements from CBH were made with 20,000t leaving Albany and 75,000t leaving Geraldton in the first half of May and 80,000t leaving Kwinana in the second half of the month.
Analysts have suggested the small number of merchants exporting between this period was reflective of the lack of merchant activity in the post-harvest market.
Growers should also be sure to examine grade spreads on contracts because there are some significant differences in the market place.