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Wednesday, November 29, 2023

Market Morsel: Aussie wheat scoring a premium.

Market Morsel

Due to the fact that of our big production, Australian wheat has actually been at a strong discount rate in the last few years. So let’s take a look at how it is looking now.

The very first chart reveals the basis seasonality in between Australian (east coast) and Chicago wheat futures. Normally we would be at a premium, however as we can see, for the majority of in 2015, basis was marked down.

This year, we have actually slowly increased our premium as conditions in Australia have actually gotten worse.

What does our basis level appear like compared to historic levels? The 2nd chart reveals the percentile rank for basis.

The greater the number, the greater the basis compared to historic levels. In current weeks, the ranking has actually been over the 80 th percentile. This suggests that the basis level has actually been lower 80% of the time because 2010.

Basis levels are normally greater when dry spell is striking and lower when a surplus is offered. The concern is, are the conditions bad enough to continue to hold a high basis level?

A strong basis, in my view, is not an advantage, as it suggests (typically) that farmers have really little to offer.

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