Each report I read this morning is telling me a different reason why US wheat futures fell sharply last night. A fair few of the reports consider rain across the Russian wheat belt as a main reason. Looking at the graphics on World Ag Weather it shows some useful falls across the Rostov region, east of the Black Sea, where around 7 – 40mm was reported. Much of eastern Ukraine did miss out though.

I can’t help but think this is straight up profit taking after the recent rally. The December wheat contract at Chicago has moved 83.75c/bu (AUD$43.17) higher in a month (here APW is +A$20). With the December contract having a little over a month of life left in it do not be surprised if we see futures prices in the US continue to fall away. This should allow local basis here to increase, if our cash bids remain relatively stable in relation to US futures. Basis chart attached.
In recent days, due to the rally in US wheat futures, our basis had come back significantly from mid-August. The average basis since June 1st has been +32c/bu over nearby futures, recently it had fallen to as little as negative 17c and was at +21c yesterday.
With the rain across the east Australian wheat belt now causing downgrading issues one might expect to see APW1 basis become more positive in the short to mid-term as traders look to cover positions.
This is potentially being outlined by the Platts APW Aussie wheat contract at Chicago. Soft red winter wheat futures fell away last night but the Platts contract actually put on a couple of dollars closing the session at US$267.50 FOB in the January slot. I need to mention that this contract still remains untraded though. US$267.50 is also equivalent to +AUD$300 ex farm LPP for APW.