Market Morsel: Is the horizon attractive?
It is crucial when grain marketing to have multi-year horizons and plans. There are times when the forward market will provide opportunities to lock in reasonable prices, at other times, it is better to step back from the market.
Our price in Australia is based on fx, futures and basis. When examining pricing on the far horizon, you should be starting with the futures forward curve.
At present, the futures forward curve is offering A$290/mt for next harvest. The basis level has to be added (or subtracted) to this price.
Dependent upon the season in 2021/22, this could be either negative or positive basis. The reality is that this basis will only be negative if Australia has a ripsnorter of a year. In all likelihood, and based on prior seasons basis, a A$300/mt number would be achieved.
You now have to decide whether locking in prices at these levels is appropriate for your business. Our view is that parcels should be relatively small this far out.
An explanation of the forward curve is here