Grain Market Update - Wheat (October 2021)

The following graph shows the movement in the Chicago (CBOT) December 2021 Wheat Futures price expressed in A$ and the 2021/22 APW Multigrade price delivered Port Kembla. Also included is the 10 year average CBOT December Futures basis for the APW Multigrade price at Port Kembla, plus the corresponding basis for the current year. 

Domestic wheat prices have continued to appreciate during July to September, despite large volatility from week to week. Currently the APW Multigrade price is $333/tonne delivered Port Kembla, compared with the CBOT December 2021 Wheat Futures price trading at A$364/tonne equivalent, resulting in a negative basis of A$31/tonne. This compares with the 10 year average basis for this time of year of positive A$63/tonne, a difference of negative A$94/tonne.  

Increases in the CBOT Wheat Futures price has driven the rise in the domestic price, based largely on the drought induced poor grain yields in North America.  

However, due to the current widespread positive seasonal conditions in Australia on the back of a large wheat crop last year, domestic supply chain constraints may be the largest limitation to accessing these high global prices. Many storage facilities still have significant quantities of old season wheat which will not be cleared prior to harvest. This, in addition to limitations in port loading facilities and shipping availability, may limit the ability of exporters to purchase the domestic surplus grain expected from the coming harvest. 

The current APW Multigrade price at Port Kembla is a Decile 7 price, calculated on prices from 2009 to date.  

Assuming freight to port of $38/tonne, the present Multigrade price represents $295/tonne local depot, which should be well in excess of clients’ Break Even Price at budgeted yields.