Market Morsel: Go West, ASW’s cheaper there.

Summary & key takeouts

There has been a lot of talk in the west about the rising discount to ASW wheat. I spoke about this on the WA country hour (listen here) on Tuesday, and CBH spoke about the issue yesterday (listen here).

The discount to ASW has fallen to extremely large levels. The first chart below shows the monthly average premium for APW over ASW for November going back to 2010. It is a remarkably higher premium (or discount). The monthly average this month has been A$50; the current spread today is A$95.

The big reason for this spread is seemingly the large volume of ASW in storage in the west, and the relatively low protein of the stack. This is exacerbated by the large feed crop likely to be harvested in the east. The question is whether this is a discount to ASW, or a premium to APW as traders try to get hold of protein in a protein wheat deficient world.

The second chart below shows the ASW spread between Kwinana and Geelong. It has dropped in recent times to the lowest level since the drought in 2018-2019. The reality is that this was a time when the east coast has a deficit and drought premiums.

Apart from that period, there hasn’t really been a time in the past decade where the east coast has been at a premium to the west.