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 pushed domestic wheat prices up to record levels in the past three months, whilst the CBOT wheat futures price in A$ terms has remained relatively stable.
Currently the CBOT December 2018 Wheat Futures price is A$260/tonne equivalent and the APW Multigrade price is $470/tonne delivered Port Kembla, reflecting a positive basis of A$210/tonne.
This basis compares with a basis of approximately A$94/tonne at this time in 2017, a reflection of current domestic demand for livestock feed and forecast poor harvest. For comparison the basis in mid September 2016 was A$30/tonne.
The current domestic price at Port Kembla is well above the Decile 9 price, calculated on prices from 2009 to date. This compares to a Decile 8 price at the same time last year.
Assuming freight to port of $38/tonne, the present Multigrade price represents $432/tonne local depot, which may not be in excess of clients’ Break Even Price at adjusted drought yields.