Grain Market Update - Wheat (October 2019)

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.

Domestic wheat prices have continued to trend higher during August and September. Currently the APW Multigrade price is $407/tonne delivered Port Kembla, while the CBOT December 2019 Wheat Futures price is trading at A$273/tonne equivalent, resulting in a basis of A$134/tonne. This compares with a basis of approximately A$210/tonne at this time in 2018.

The CBOT Wheat Futures price has decreased by approximately A$16/tonne equivalent since July, while the PKE APW Multigrade price has increased by $55/tonne. Despite the slight reduction in the international price for wheat, $273/tonne is $30/tonne greater than the 10 year average, while the domestic price is $116/tonne greater than the 10 year average. This is a reflection of the continued poor growing conditions, especially in eastern Australia, leading to reduced supply plus a continuation in demand for feed grain from livestock producers.

The current APW Multigrade price at Port Kembla is in excess of a Decile 9.4 price, calculated on prices from 2009 to date. This is a similar decile to 12 months ago.

Assuming freight to port of $38/tonne, the present Multigrade price represents $369/tonne local depot, which may not be in excess of clients’ Break Even Price at drought adjusted yields.