Market Morsel
The bumper years are over. We have had 3 substantial years producing enormous crops nationally. The dryness is here, a minimum of in spots.
Rates are normally an excellent barometer. We can utilize them to identify what individuals are believing. Let’s take a look at the very first chart listed below.
This chart reveals the basis level (premium or discount rate) in between Brisbane ASW and Chicago wheat futures.
The Northern New South Wales/ Southern Queensland area is where the bulk of the nation’s domestic need for grains lies. So when it gets dry in these areas, grain needs to be pulled from all over to satisfy the domestic need.
Customers have a long memory, and with talk of El Nino and drying conditions, they do not wish to get left short.
So, back to the chart. 2018 and 2019 were years of enormous premiums over Chicago wheat; this was because of the dry spell. We can see that the premium in Brisbane has actually increased significantly in current months.
At present, the premium is still method off the peak dry spell premiums. We are A$ 84/mt off that level. Will we get to that level this year? Will we see those kinds of premiums over Chicago?
Let’s take a look at the present scenario. The crop conditions are degrading, and we anticipate that there will be down modifications as we progress into harvest. The concern is simply how far.
The 2nd chart reveals the combined Queensland/NSW wheat and barley production expectations for 2018, 2019 and 2023. I have actually picked the September projections and the last projections. There were substantial modifications downwards from the September projections.
The present projections are considerably higher this year than in September 2018 and 2019. We anticipate modifications, however not to near the levels experienced in those years. This decreases the requirement to move big amounts from neighbouring states (SA/VIC) and even transhipments.
We do anticipate basis to be favorable, however it is difficult (at present) to see basis levels increasing to the peaks of 2018 and 2019; we simply aren’t at that level of dry spell yet.