Australian wheat prices peaked in early December.
This was no surprise given that harvest in most states had ground to a halt with bad weather, and Chicago Board of Trade (CBOT) futures were strong, partly because of the uncertainty surrounding our crop.
CBOT futures peaked in late November, hitting A$435.27 per tonne on the December contract on November 24.
Futures then began falling away, but with our harvest stalled, our prices continued to move higher.
The strongest market in the country has been the South Australian market, where Port Adelaide prices peaked at $441/t on November 30 and again on December 6.
Our market was plagued by weather and quality uncertainty, harvest was stalled, end-users and the trade needing milling quality grain could not get it, with growers unable to sell in any quantity.
As soon as the harvesters began to roll again, growers hit the market hard with any grain they had in the bin.
Prices fell sharply, and by December 17 as much as $80 per tonne had been pulled from prices in some port zones.
We have since seen the market post a partial recovery, reflecting a weak recovery in CBOT futures leading into the Christmas break, but that recovery faltered as we limped into New Year.
There were two drivers behind the drop in our cash market.
The main one was a resumption of harvest of what should be a record crop for Australia.
Even though there is serious weather damage, the volume of milling wheat out of Western Australia, South Australia and Victoria will be substantial, topping up what has been salvaged in New South Wales.
As harvest resumed and growers sold, the premiums in our market generated by trade shorts were washed out. We lost a lot of basis.
On top of that we had the decline in CBOT futures, and a small gain in the value of the Australian dollar.
Of the $78 drop in prices in the Port Adelaide zone, $4.76 was attributed to a lift in the Australian dollar, $16.82 was the result of a decline in CBOT futures, and $56.42 was the result of a sharp decline in basis.
When our cash market peaked, basis was as high as $19.50 per tonne in the Port Adelaide zone.
When the market bottomed out basis had retreated to a very weak $36/t under March CBOT futures, as the market tested to see where grower selling would dry up.
On New Year's Eve, basis in the Port Adelaide zone had recovered to $10 per tonne under CBOT values, and prices were back to $385/t.
Now we wait to see where the markets head against global supply and demand factors, and the outlook for the 2022 global crop.
- Details: 0411 430 609 or malcolm.bartholomaeus@gmail.com
