Turkey picked up 255kt of feed barley on Tuesday at roughly US$250 CFR, the price varied depending on discharge port. On the back of an envelope this number equates to a local bid of something close to AUD$230 – AUD$240 XF LPP. Turkey has a bunch of barley sitting in their back yard, the Black Sea states, to buy from. One would assume that Australian barley would struggle to be competitive into S.Arabia, so would be less competitive into somewhere like Turkey. We can use this data to work out how competitive those Black Sea sellers could be into the Asian market though. It costs a Black Sea state something between US$15 and US$20 to freight grain to Turkey, some a little less some a little more. This gives us a rough Black Sea FOB estimate of US$230. This is about US$4.50 higher than current public FOB values for Russian Black Sea barley, so is close enough given that Russian port location may well cost more than US$20 to Turkey.
Black Sea feed barley is going to come in somewhere around US$267 C&F China. Currently we see Aussie feed barley valued at something closer to US$230 C&F China. Aussie barley being the cheapest available feed barley to China by some US$5.00 to US$10.00/t. Even Argentine barley is closer to the same price C&F China as what the Black Sea product would be.

US soybeans futures got a nudge higher by Trump. His latest speech emphasized that soybeans will be on the agenda when he next meets with Chinese trade delegates and Xi. In the meantime Trump has stated that some of the tariff income will be allocated to US farmers to assist farm income due to the lack of US bean / corn sales to China. Currently we see S.America selling soybeans to China, many soybeans. Brazilian soybeans are valued at roughly US$463 C&F China, Argentine soybeans at roughly US$442 and US is indicated at US$450. US beans are price competitive. But as we saw with Australian barley a couple of years ago, and Canadian canola now. If China do not want to buy from a country, they have no issue in paying more to buy elsewhere.

The trade continue to actively seek old crop wheat for the local LPP consumer market. Yesterday saw SFW1 change hands at $300 SW LPP, indicating a delivered consumer price of about $325 delivered Killara / Caroona. Trade shorts are out there but Tangaratta continues to demand ASW or better. This only leaves the feed lots as the main SFW1 buyers when cleaning up silos.
There was no difference in bids between ASW and SFW1. There was a significant difference between the highest and lowest bid for the SFW XF though, around $30.00 difference to be precise.
New crop wheat fell away a couple of dollars yesterday. Looking at the plausible downside given the move in US futures and some international cash markets this could probably be perceived as a win. Call it a slap in the face, not punch in forehead.
It does raise some questions about trade hedge strategy though. I had assumed softer basis leading into harvest. That could still be the case, but I’m wondering if the trade are driving this basis to Chicago higher now so as to sell physical and hedge futures. Is the trade expecting to see US futures improve now we are post N.Hemisphere harvest. Will the funds exit Chicago shorts in an orderly fashion or will a mass buying spree for some reason or another drive US wheat futures higher quickly, while local prices here remain flat, giving the trade the opportunity to buy softer basis and exit the hedge with profit ??
Either way it worries me, if the trade is selling now and there is no hedge profit due to a flat US futures market or AUD, than the easiest way to generate profit is to soften cash bids and buy cheaper than they have sold, potentially by limiting daily purchase volume.
Am I bearish wheat in general, no, not really, it’s very cheap already. Do I think the buyer cares how low it is compared to production costs, not at all.