I get asked what I think wheat will be worth in 3, 4, 6 , 12 months often. Fair enough given what I do. The outside influences are always the same. The weather, politics and currency. This can make it appear hard, very hard sometimes, like now, when politics is having a large impact on the demand side.
Is it really as hard to determine as what we think it is though. If customer A can’t / won’t buy off supplier B, won’t it just become an exercise in arbitrage. Who will then supply customer A, and who will supplier B sell their product too.
Perhaps I’m just over simplifying this being a fundamental analyst at heart, possibly placing more faith in weather being the major influence versus currency and politics (often two in the same). But there’s no denying their impact. The Black Sea war, US trade tariffs, China anti dumping cases, EU sustainability compliance, Japanese dock inspection. These all influence prices, sometimes not the way they are supposed to and sometimes there are winners as well as losers. At the end of the day supply and demand will win, the old saying “low prices fix low prices” will ring true.
As silly as this might sound what we really need to know is what the “low price” is or could be, and what the “high price” could potentially be. This may prevent you, as a seller, from missing a good price or selling too low. The low price, for all intensive purposes is of course the cost of production, hopefully plus a margin of at least enough to feed yourself and sow the next crop. If this can’t be done the next crop will not be the same as the last one harvested.
Over the last 20 years wheat futures at Chicago saw a low price in the nearby contract of 293c/bu in Dec 2005. If we take that low and apply an annual rate of growth of 2.5% to it, that would make that low equivalent to 492c/bu today.
This is terribly close to today’s market, potentially implying we are currently seeing prices very, very close to the worst we’ve seen in 20 years. Can they go lower, of course, but the odds are could be in favour improvement versus further downside. Then we have currency and politics.
It’s imperative you know your cost of production, a hard number to determine on a per tonne basis until post harvest.

Local markets remain dead. The risk versus reward for new crop contracts is poor. The spreads to premium wheat remains low. Locally we see the spread between new crop APW1 and APH2 on the track at +AUD$15.00 yesterday using multi grade buyers. The spread between SRWW and DNS wheat futures in the US December contract is 62.75c/bu, AUD$35.55/tonne at today’s exchange rate.
The spread from APW to SFW1 (not FED1, that’s not an option), is -$50.00. So you can not only lock in a terrible base price of AUD$325 NTP Newcastle, but you could also lock in a APH spread that’s less than half of what US futures is indicating it could be, and you could also lock in an SFW (not FED1) price of AUD$275 NTP NTL, roughly $233 ex farm LPP equivalent, for something that has recently changed hands at closer to $300 ex farm, not exactly enticing is it.
Looking at the track market you might just throw the hands in the air and consider locking in flat priced ASW1 at $305 delivered Tangaratta. ASW, sounds like an easy grade to grow doesn’t it, well it’s not that easy. ASW1 has no limit on protein but the end user will generally shy away from sub 10%. The biggest hurdle in producing low protein, but not too low, ASW1 wheat is the test weight and FN. Test weight will have to be 76kg or greater, not 70kg like SFW1. Here’s the conundrum that growers often face with an ASW contract. They have had a good season test weight is good, but so is quality. It’s often the case that the wheat will then meet H2 standard and be worth more, not always the case but often enough to know that the ASW contract value needs to at least beat the track H2 price at the time of contracting. Yesterday, ASW was worth $305 Tamworth, H2 was worth $298 delivered Gunnedah. The next hurdle is the price, are you locking in a profit. Then we talk washouts, what happens if the wet weather continues and you produce lower than 76kg test weight wheat. Have you contracted at a high enough price to not ware a washout, or have you contracted at the bottom and are now buying ASW on a rising market