Smart Marketing: Supply pushes prices higher

This covers up the actual move in prices over that time, firstly up quite sharply to a new multi month high, and then down sharply, particularly in intraday trading, but also on daily closing values.

Mid week last week the market had a sharp two day rally that took it from US570.5c/bu (March contract), to an intraday high of US592.5c/bu.

In between those price levels, the closing high was US581.5c/kg overnight on 21 January.

From a high of US592.5c/bu we have since recorded a low of US559.5c/bu recorded overnight on Monday night.

Last week's high will have taken us very close to the mid year high seen in 2018 and then we have to go back to mid-2015 to find prices at a higher level in US dollar terms.

In Australian dollar terms, the closing high mid-week last week of $312.24/t, was the highest daily close since November 2012.

In watching our market, it is fine to know who is paying what price, when and where, but it is also important to know why that price is being paid. Last week in the South Australian market, we had three competing forces at work.

One was the trade into NSW from rail heads north of Adelaide, another was from local endusers, and the other was from exporters trying to fill export contracts to allow the surplus in South Australia to move to export destinations.

The market was running at an equivalent port price of $356/t at a key railhead north of Adelaide.

This site is also a good site for supplying wheat for the local domestic users (chicken farms and a major feed mill).

It was the chicken industry that set the highest price.

This is telling us there is real competition between the three competing outlets.

The current price is the highest price in 12 months, but it has coincided with the peak in US futures (a surrogate for export values).

Basically, one of the "whys" is the international market, driven by rising Russian wheat prices.

The fact local domestic endusers are paying the highest price indicates that supplies north of Adelaide are tightening, and that further sales into eastern Australia need to be slowed to ensure enough grain is left behind in locations where it is needed.

These are the factors also driving prices in northern NSW, with South Australia continuing to play a major role in filling the supply gap in NSW.

Victorian and Western Australian prices will find their place against South Australian price levels.