Market Morsel: Is the price passed on?
On Wednesday we woke up to some great news. The monthly WASDE report had been released (see here), and the market had reacted with a solid rally in futures prices. The result was an A$11 rise in pricing levels.
We got quite a few messages asking whether the price would be passed on. It is worthwhile to examine whether the increase feeds through to our local pricing.
In general, the majority of the movement in wheat pricing in Australia can be explained by movements offshore. In drought years the influence of overseas diminishes, as basis becomes more important to pricing.
So how did the local market react? Did we get the full A$11?.
The answer depends on where you are. The charts below display the change in price from Tuesday to Wednesday, based on the day’s highest price.
Firstly, the extent of the rise depends on where you are. Geraldton was the gold winner experiencing a rise A$1 greater than CBOT. The daily rise then fell as you travel around the coast. The larger value passed onto growers in export zones is as a result of the logistics, and shipping capacity versus an overstretched network in the eastern states.
Secondly, it is also dependent on the grade. When you expand this chart to look at ASW, you find that ASW received a higher increase in daily pricing through several ports on the east coast.