Big double digit gains for wheat and soybeans futures in the USA should ripple through the markets today, or not.
In the last four days hard red wheat futures have put on 53.25c (AUD$25.29) on the nearby contract and 48.25c (AUD$22.92) in the July contract. Over the same period of time our local H2 values have rallied………well… nothing.
This is a US futures rally not a real world rally at present. The punters were short wheat, the weather map in the US is ugly, crop ratings are slipping and the chance of stripping an average HRW crop is diminishing daily and it’s only the 2nd of March. The 1996 rally was a frost event on ANZAC day. So the growth phase at present in the US is something like dormant or just breaking dormancy. It’s like having a good sowing and a dry July or August here. So realistically there’s a long way to go. Hence why local or global values have not exactly tracked this rally dollar for dollar, the physical market tends to work on reality not futures…..to some degree at least.
This doesn’t mean you can’t take advantage of the volatility with products like swaps or US futures. Pick the top, buy a put, sell a swap buy a call, it’s your money, find an “advisor” and throw the dice, sorry, do some “hedging”.
Prompt white wheat values for an APW1 grade out of Portland Oregon is offered at US$5.95/bu, AUD$282. Australia has a few dollars up our sleeve in ocean freight and the US costs differ a little from our own but when comparing white wheat offers from the US to white wheat offers from Australia is does show we are, in the Newcastle zone, looking at a potential premium of roughly AUD$40 over export parity. Not quiet as much as I would have expected to see given the current S&D but at least a premium.