WEEK-on-week Chicago wheat futures are up about $6 a tonne, with December 2017 prices continuing to firm since baseing at the end of August, and the Australian/US dollar also helping by falling roughly US2 cents from the high printed two weeks ago.
The period between northern and southern hemisphere harvests can be a flat-spot for market moving news; this year being no exception.
Currently US winter wheat crop planting is 13 per cent complete (just behind five year average pace) and some pundits are guessing a 2018 total wheat area similar to, or slightly above, 2017s reduced plant of 45.1 million acres.
Global economic growth estimates are also improving which tends to float all commodity boats.
On top of futures gains, Newcastle and Port Kembla wheat track prices are up an additional $10 a tonne as dry conditions continue to diminish prospects for the NSW crop.
So the Newcastle and Port Kembla track premiums (basis) are $120/t and $110/t over (respectively) the Chicago futures price.
That is the highest I can remember, and to illustrate how quick the rise has been, those 2017-18 basis premiums are $100/t higher than at-sowing levels.
Regarding canola, today’s $560/t Newcastle/Port Kembla track price is $10/t higher week on week; well above our international competitors.
And we will remain high while seller’s are reluctant and domestic needs remain unfulfilled.
But even as the crop is burning up across large areas, we can be confident there will be an exportable surplus.
There have been headwinds in international Canola pricing recently, including better than expected Canadian yields and the announcement that the European Union Commission decided to lower import duties on bio-diesel products from Argentina and Indonesia.
So where to from here?
The high price will eventually do its job and domestically it will force feedlots to reassess their head numbers based on profitability.
Companies with grain-related assets have an incentive to buy grain to turn those assets, but there is always a tipping point.
Internationally, the price will test even the “stickiest” customers’ allegiance to Aussie wheat. And will drag grain up from the South.
But all these things take time to come to fruition, so in the short-term NSW wheat basis will continue to display cork-like properties, regardless of what world prices do. And in the meantime, the only thing that could change the equation is rain, and even then, only if it comes in the next few weeks.