Old season wheat prices soar

This time 12 months ago old season wheat prices in Australia had just slumped to a sharp low. In SA prices had just hit $255 a tonne, down from $400 at Christmas, and just before recovering back to $300 to $320/t. This year prices for old season wheat are $100/t higher.

In NSW, the epicentre of the drought and demand for feed, cash prices last year were around $385/t on a Newcastle port basis. This year prices are hovering around $410/t. This is around where prices settled for a while mid-year last year.

In the new season market NSW was around $340/t last year, with a very strong drought basis already in the forward market ($100/t). This year the forward market is registering $320/t, with a basis of $39.50/t.

In export zones like Port Adelaide and Kwinana, 2019 new season prices were around $270 and $280. This year forward prices are $302/t Pt Adelaide, and $326/t Kwinana, despite a weak basis.

The theme is that this year, even with reduced drought concerns, old season wheat prices are sharply higher in both the eastern states market, and the export dominated markets of SA and WA.

New season wheat prices are much stronger this year in the export based port zones of SA and WA, and only marginally weaker in eastern states markets.

So, where is this price strength coming from? Strong old season prices versus new season prices are still being driven by drought here in Australia, but that is not the full story.

New and old season prices are both being driven by a weaker Australian dollar (down 5 US cents), and a stronger US futures market (100 US cents a bushel on July futures and 85 USc/bu on December). The net result is a$A75/t lift in the $A value of December futures year on year.

At this snapshot in time, prices in export-based port zones are tracking well above last year on both old and new season prices. In the east the old season market is closer to last year, and new season prices are modestly lower, assuming a move away from the recent years of drought.