Australian wheat a bargain as key grain sources struggle
Wheat prices in international markets have spiked but not all of the rise is available in the Victorian market. See what’s happening and why.
GLOBAL markets were shaken by continued restrictions to key sources of grain, but the Australian market response has been more muted.
This week wheat futures are up $10 a tonne in the Black Sea, $16 in Paris, $17 in Chicago yet only $5 a tonne for the east coast Australian ASX contract.
The Russian Government is concerned their wheat export tax has not reduced the domestic price of wheat nor curbed inflation as planned.
Russian wheat growers are proving to be reluctant sellers this season and export demand has simply absorbed the export tax of €25 a tonne since its introduction in December.
Accordingly, there have been rumours the export tax may be increased.
These were confirmed last week with the tax doubling to €50 a tonne and further export taxes are being considered for Russian barley and corn.
This bullish news coincided with the US Department of Agriculture’s report cutting US wheat stocks by 700,000 tonnes to 22.75 million, down 19 per cent year on year.
The report also forecast reduced global supplies, increased consumption and higher exports.
Global stocks were lowered by 1.6m tonnes to 303m tonnes.
Argentina’s wheat crop is forecast to be the lowest in five years.
In an attempt to lower the cost of staples domestically, the Argentine Government is also considering export taxes to restrict exports.
Wheat markets were also supported by higher corn and soyabean prices each rising $18 and $20 a tonne respectively on the Chicago futures.
Australian wheat is considered cheap.
When Victorian wheat prices normally trade at an equivalent to $40 to $80 basis premium to Chicago futures, this week’s exporter bid of $297 a tonne delivered to Geelong port is a $27 a tonne discount to Chicago futures.
Only port and shipping capacity limits access to export wheat markets.
Exporter bids are setting the market and driving down the price premiums for quality.
Exporters accumulating for ships at Geelong are bidding $300 a tonne for SFW grade wheat, exceeding the highest direct port price for Hard 2 grade wheat of $297.
Other direct port prices bids for February and March delivery are $256 a tonne for BAR1 grade barley delivered to Geelong and Portland and $625 a tonne for canola delivered to Geelong without bonifications for oil.
Demand has pushed feed oats prices up $30 a tonne this week and milling oats prices are up a further $5 a tonne.
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