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Grain Market Update – Wheat (November 2017)

The following graph shows the movement in Chicago (CBOT) December 2017 Wheat Futures price and the 2017/18 APW Multigrade price delivered Port Kembla.

Prices have been somewhat variable during the second half of 2017.  Dry and frosty conditions in much of NSW led to the basis reaching plus A$118/tonne during late September, then rain during October and November saw domestic prices soften.  Currently the basis in the Port Kembla Zone is around A$80/tonne, compared with the basis in the Geelong Port Zone which is A$30/tonne behind at approximately A$50/tonne.  This difference between port zones is a reflection of the dry conditions in the north, which provides opportunities for those in the south to deliver grain to sites in the Port Kembla Zone for a premium of around $30/tonne.

These price differences reflect the current situation in which domestic factors influence the price of wheat more than international factors.

Currently the CBOT December 2017 Wheat Futures price is A$206/tonne equivalent and the APW Multigrade price is $285/tonne delivered Port Kembla, reflecting a positive basis of A$79/tonne.  This compares with a basis of approximately A$30/tonne at this time in 2016.

The current domestic price at Port Kembla is approximately a Decile 6 price, calculated on prices from 2009 to date.

Assuming freight to port of $38/tonne, the present Multigrade price represents $247/tonne local depot. This compares with the average budgeted Break Even Price for clients in 2017 of $171/tonne and $145/tonne for the top 20%, at Decile 5 yields.