Grain Market Update - Wheat (September 2020)

The following graph shows the movement in Chicago (CBOT) December 2020 Wheat Futures price expressed in A$ and the 2020/21 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 lower during July and August, but increased slightly more lately. Currently the APW Multigrade price is $287/tonne delivered Port Kembla, while the CBOT December 2020 Wheat Futures price is trading at A$281/tonne equivalent, resulting in a basis of A$6/tonne. This compares with a basis of approximately A$134/tonne at this time in 2019 and A$29/tonne in early September 2016.

The PKE APW Multigrade price has decreased gradually since June, while the CBOT Wheat Futures price has fluctuated by approximately +/- $20/tonne, but is currently at a similar price to that in June.

The decrease in the Australian domestic price and the erosion of the basis, is largely due to the forecast above average wheat yields and the current, plus predicted future lack of demand for feed grain.

United States wheat prices as measured by CBOT, have risen due to dry conditions within the grain belt plus strong export sales to China.

The current APW Multigrade price at Port Kembla is a Decile 6 price, calculated on prices from 2009 to date. This is a very large decline from the prices seen 12 months ago, which were supported by a very high basis due to domestic grain shortages.

Assuming freight to port of $38/tonne, the present Multigrade price represents $249/tonne local depot, which should be well in excess of clients’ Break Even Price, particularly when above average yield predictions are used in the calculation.