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Grain Market Update – Wheat (September 2014)

The following graph shows the movement in Chicago (CBOT) December 2014 Wheat Futures price and the 2014/15 APW Multigrade price delivered port.

To mid-May the basis was in the positive $20 to 30/t range. From mid-May to date, the basis has strengthened further peaking at $70 during late August.

At a recent Partners in Grain workshop, Tim Glass from Lachstock Consulting made the following comments with regard to the wheat market.

  • World stocks are high
  • US stocks to use ratio is high
  • Global wheat production is in excess of consumption
  • Russia has wheat and may need to export it in order to generate US dollars
  • Chicago prices are driven by Black Sea production
  • Australia’s basis is indicative of a 20 million tonne crop
  • Forecasts are for 23 to 24 million tonne crop
  • Australia’s exports are well back on one to two years ago
  • A significant rainfall event in the north will lead to a large sorghum planting

Overall these points suggest that there is little upside in global prices and the basis is fragile. Should a significant rainfall event occur in either southern NSW, the Riverina or Northern NSW, the basis could fall quite quickly.

Although this information clearly indicates that now is a good time to make wheat sales, production is still very uncertain.

Should the basis hold, it may be prudent to be decisive and make sales prior to or during harvest.

Currently the CBOT December 2014 Wheat Futures price is A$205/tonne equivalent and the APW Multigrade price is $275/t delivered port, reflecting a positive basis of A$70/tonne.

Wheat Sept 14