The following graph shows the movement in Chicago (CBOT) December 2018 Wheat Futures price and the 2018/19 APW Multigrade price delivered Port Kembla.
Drought induced supply and demand constraints have maintained domestic wheat prices at record levels, whilst the CBOT wheat futures price in A$ terms has remained relatively stable.
Currently the CBOT December 2018 Wheat Futures price is A$261/tonne equivalent and the APW Multigrade price is $452/tonne delivered Port Kembla, reflecting a positive basis of A$191/tonne. This basis compares with a basis of approximately A$79/tonne at this time in 2017 and A$30/tonne in 2016, a reflection of current domestic demand for livestock feed and forecast poor harvest.
Whilst still high, the basis has eased by approximately A$20/tonne since mid October, which could be a result of early harvest sales of feed grain easing supply constraints, or the market’s anticipation of a sorghum crop in northern NSW.
The current domestic price at Port Kembla is A$143/tonne above the Decile 9 price, calculated on prices from 2009 to date. Given such prices, there seems little reason to store grain unpriced over and above the amount required to feed livestock.
Assuming freight to port of $38/tonne, the present Multigrade price represents $414/tonne local depot, which may not be in excess of clients’ Break Even Price at adjusted drought yields.