Chicago Board of Trade (CBOT) wheat futures surged into the end of last week, adding US28.5 cents per bushel - or $18.38 per tonne - in the Thursday night and Friday night trading sessions.
The market in Australia opened this week with December futures at US625.25c/bu, which is the highest for a nearby contract since December 2014 and - in Australian Dollar terms at $324.59/t - the highest level since April 8 this year.
The peak in the futures market in Australian Dollar terms was $357.57/t on March 26 in the midst of the COVID-19 price spike.
Back then, the dollar was at US60.5c, compared to US70.8c this week. So, this time we are getting to a high price base without the help of an exceptionally weak Australian dollar.
Having nearby CBOT futures above $320/t puts the underlying wheat market back into rare territory.
Since late 2008, the market spent only two days above that level in 2011; five days in 2012; and now 18 days in 2020 - back in March and this week.
Internationally, wheat prices are being set by Russia - where farmers have once again slowed their pace of sales as they wait for rains to establish and lock-in production potential for their next winter wheat crop.
Market analysts are saying that US wheat prices are currently fully competitive with both European Union and Russian wheat prices.
This signals that there could be increased demand for US wheat, which will add further to the rundown in US wheat stocks if that unfolds.
Here in Australia, our export prices are apparently cheaper than US wheat prices by US$10-15/t, according to Tobin Gorey, from the Commonwealth Bank of Australia. He also said domestic prices are US$15-20/t less than Russian prices.
That should make Australian wheat some of the cheapest wheat in the world.
Yet at the same time, cash prices being shown to growers indicate very weak basis levels - particularly right now as our prices fail to follow the gains in CBOT futures in full.
Weak basis levels were to be expected this season, at least for a while.
Outside of Western Australia and South Australia, Australia has not been very active in global markets for about three years.
Even tonnages from the two export states were limited due to domestic demand.
We have to buy back market share that has been filled by Argentina and Russia, in particular, as well as from the other major exporters.
Farmer selling will also weaken our basis levels.
Our harvest has started and we are seeing growers, with their first decent crop in several years, locking-in some tonnage while prices are above $300/t port basis.
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