The grain market has been yearning for some "real price" discovery after Chicago Board of Trade wheat futures have been smashed lower in recent weeks.
Last week Saudi Arabia, a traditional large importer of wheat, purchased nearly 500,000t of 10 per cent protein hard milling wheat for November to January delivery at an average price of US$442 a tonne cost and freight delivered their ports (C&F).
If we work this back to an equivalent Kwinana FIS price or port track price out of the eastern states of Australia it works out to be about A$550/t and A$520/t respectively, on paper at least.
Note this price conversion needs to be considered in context of highly volatile international freight and currency markets, the likelihood Australian fobbing costs may increase, and slippage costs in the supply chain being incurred by traders such as demurrage on ships.
Using best information to hand, the prices of these physical cargoes do provide a recent guide to international values and how it relates to Australian pricing, over and above comparisons to CBOT futures.
Algeria and Tunisia have also been active in purchasing wheat for delivery in the northern hemisphere new crop window. Algeria reportedly purchased over 700,000t of wheat for August delivery at around US$445/t C&F.
Typically these will be supplied by Europe and the Black Sea. The purchases indicate firstly that market prices have fallen enough to attract demand, and secondly suggests Australian wheat remains very competitive internationally at current grower bids.
Global buyers remain nervous over new crop supply generally but right now it's becoming available. Crops are smaller in north America, Europe, China, India and the Black Sea region is an unknown.
A significant grain corridor to allow exports out of the Ukraine looks unlikely at this stage given Russia is bombing Ukrainian ports, and the maximum amount of wheat exported from Russia in a month is 2.5 million tonnes since the war began.
The current United States Department of Agriculture estimates have Ukraine and Russia exporting 10mt and 40mt respectively, which at present looks difficult to achieve.
The price correction in CBOT wheat has been on the back of weakness in global capital markets and fund managers selling net long positions, coinciding with a time of the year we traditionally see global prices soften as the northern hemisphere harvest gets under way.
Remember Australian growers also have a say in the price you receive. You have the power to offer grain for sale at the price you want and let all buyers try and buy it rather than accept published bids.
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