Grain Market Update - Wheat (November 2016)

The following graph shows the movement in Chicago (CBOT) December 2016 Wheat Futures price and the 2016/17 APW Multigrade price delivered port.

Both the CBOT Futures Price and the APW Multigrade price have fallen away significantly since June. This is a result of surplus wheat stocks both domestically and worldwide.

Given high world wheat stocks, a significant increase in global wheat price seems unlikely in the short term. In addition the strong basis suggests there is more downside than upside in domestic prices, due to the size of the Australian crop and its likely quality.

In the event of above average yields, it is likely that protein levels will be low. In this case the potential exists for some short term premiums for higher protein grades.

History would suggest that such protein premiums will be short lived, so growers should consider selling into these markets without delay.

Currently the CBOT December 2016 Wheat Futures price is A$197/tonne equivalent and the APW Multigrade price is $230/t delivered port, reflecting a positive basis of A$33/tonne, which is relatively high for current seasonal conditions.

The domestic price at present is approximately a Decile 1 price, calculated on prices from 2009 to date. This provides little incentive for hedging at current values.

Assuming freight to port of $38/tonne, the present Multigrade price represents $192/tonne local depot. This compares with the average budget Break Even Price for clients of $190/tonne and $165/tonne for the top 20%, at budgeted wheat yields.