Chicago corn, wheat and soybeans all marched higher in overnight trade. MGEX March 22 spring wheat futures closing above 700c/bu (AUD$331.78/t). This is the first time spring wheat futures have been up over 700c for some time.
Back in 2017 the spot market ran into the 700’s in late June / July / and early August, topping out at 812c on the 4th of July. Prior to 2014 these numbers were almost considered common. So to call this a boom in prices may just be an historical oversight, could we simply not be returning to a trend not seen since the 2010 – 2014’s.
The counter argument could consist of a quick look at the global wheat stocks to use ratio during that period. Generally the ratio was below 30% between 2003 – 2014. Currently we see the ratio around 38%. Back then we were coming off a spell of even much lower ratio’s from the 2003 – 2009 period, in 2008 the ratio dropped to 20.47%, prior to the GFC.
So potentially this rally in wheat futures may be US centric, don’t get me wrong, the ripple effect over time is very likely if the weather pattern in the US spring wheat belt and the Canadian prairies doesn’t improve. For it to have an impact on our old crop wheat values is possible but it is more likely that new crop values will benefit. It seems counter intuitive but our short term basis is poor while new crop basis, not so much.
Looking at Canadian cash bids out of SW Saskatchewan we see a June 2021 lift bid at C$295/t while a Jan 22 lift is bid at C$289/t. If the poor weather persist one might expect to see the Jan22 contract close that gap. Locally we see old crop track APH2 priced at A$297 while new crop is bid at A$316, a A$19 spread in the opposite direction to the Canadian market. Cost of G’corp carry A$22 Jan > Nov ???