Grain Market Update - Wheat (May 2023)

The following graph shows the movement in Chicago (CBOT) December 2023 Wheat Futures price expressed in A$ and the 2023/24 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.

Currently the APW Multigrade price is $382/tonne delivered Port Kembla, while the CBOT December 2023 Wheat Futures price is trading at A$359/tonne equivalent, resulting in a basis of A$23/tonne. This compares with a basis of approximately -A$132/tonne at this time in 2022 and the 10 year average basis of A$9/tonne. This significant year on year improvement in the basis, is largely a result of stabilisation of global wheat supplies following the initial disruptions from the Ukraine-Russian war.

Forecasting movements in the grain market is currently very challenging, with multiple positive and negative factors influencing the market. This is demonstrated by the chart below, with minimal price fluctuations since the start of the year. Some of the factors currently impacting prices include volatile weather conditions in the USA, a historically large wheat sowing programme in Canada, falling oil prices, plus the influence the Ukrainian conflict will have on grain supplies out of the Black Sea region.

The current APW price at Port Kembla of $378/tonne is a Decile 8 price, calculated on prices from 2011 to date. This would suggest that any old crop price rises may be minimal, however the new crop price is trading at a normal premium, reflecting the cost of carry.

 Assuming freight to port of $38/tonne, the present Multigrade price represents $344/tonne local depot, which should be in excess of clients’ Break Even Price at average yields. However with the remainder of the season forecast to be drier than average and ongoing high cost of most inputs, clients will need to closely monitor their expenditure throughout the season, to ensure profitability.