The following graph shows the movement in Chicago (CBOT) December 2019 Wheat Futures price expressed in A$ and the 2019/20 APW Multigrade price delivered Port Kembla. Also included is the 10 year average CBOT December Futures price expressed in A$ and the 10 year average APW Multigrade price at Port Kembla.
Wheat prices have remained flat in 2019, with the basis also remaining relatively stable at approximately A$90/tonne. Currently the CBOT December 2019 Wheat Futures price is A$253/tonne equivalent and the APW Multigrade price is $343/tonne delivered Port Kembla, resulting in a basis of A$90/tonne. This compares with a basis of approximately A$40/tonne at this time in 2018.
Year on year, the CBOT Wheat Futures price has fallen approximately A$10/tonne equivalent, while the PKE APW Multigrade price has increased by $40/tonne.
This clearly demonstrates the limited supply of wheat in New South Wales and strong domestic demand for feed grains caused by the 2018 drought. This has insulated the domestic market for wheat from the weak international market. With CBOT Wheat Futures price currently A$24/tonne below the 10 year average price, an erosion of the basis caused by favourable seasonal conditions, would result in the price of wheat in New South Wales falling dramatically to a relatively low level.
The current APW Multigrade price at Port Kembla is approximately a 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 $305/tonne local depot, which should be well in excess of clients’ Break Even Price at budgeted yields.