THE Chicago Board of Trade (CBoT) wheat futures surged into the end of last week, adding 28.5 US cents/bushel, or $A18.38 per tonne in the Thursday night and Friday night trading sessions.
The market in Australia has opened up this week with December futures at 625.25 USc/bu, the highest for a nearby contract since December 2014, and in Australian dollar terms at $324.59/t, the highest since April 8 this year.
The peak in the futures market in Australian dollar terms was $357/t on March 26 in the midst of the COVID-19 price spike.
Back then the dollar was at US60.5c, compared to 70.8c this week, so this time we are getting to a high price base without the help of an exceptionally weak Australian dollar.
Having nearby CBoT futures above $320/t puts the underlying wheat market back into rare territory.
Since late 2008 the market has only spent two days in 2011 above that level, five days in 2012 and now 18 days this year, back in March and then right now.
Internationally wheat prices are being set by Russia, where farmers have once again slowed their pace of sales as they await rains to establish and lock in production potential for their next winter wheat crop.
Market analysts are saying that United States wheat prices are fully competitive with both European Union and Russian wheat prices, signalling that there could be increased demand for US wheat, which will add further to the rundown in US wheat stocks if that unfolds.
In Australia export prices are apparently cheaper than US wheat prices by US$10 to $15/t, according to Tobin Gorey from the Commonwealth Bank of Australia.
He also says our prices are US$15 to $20/t under Russian prices.
That should make Australian wheat some of the cheapest wheat in the world and yet at the same time cash prices being shown to growers indicate very weak basis levels, particularly right now as our prices fail to follow the gains in CBoT futures in full.
Weak basis levels were to be expected this season, at least for a while.
Outside of Western Australia and South Australia, Australia has not been very active in global markets for about three years.
Even tonnages from the two export States were limited because of domestic demand.
We have to buy back market share that has been filled by Argentina and Russia in particular, as well as from the other major exporters.
Farmer selling will also weaken our basis levels.
Our harvest has commenced and we are also seeing growers, with their first decent crop in several years, locking in some tonnage while prices are above $300/t port basis.
- More information: Malcolm Bartholomaeus on 0411 430 609 or mail malcolm.bartholomaeus@gmail.com