Market Morsel: Is the wheat price rise being passed on?

Grain | 26th July 2023 | By Andrew Whitelaw

Market Morsel

The market is rallying on the back of the continued attacks by Russia on grain infrastructure in Ukraine. We have spoken about this in recent articles and also on the ABC Country Hour this afternoon (listen here).

Futures markets react quickly and tend to move quicker than physical markets. In recent years we have seen basis in Australia at low levels due to the scale of the local crop. I thought it was worthwhile to examine whether the price reaction in the overseas markets was being passed onto our local producers.

The first chart below shows the weekly average price for wheat APW (new crop) this week and last.

The pricing reaction has been strong at a local and futures level. The second chart shows the change in price, and for the most part, a large proportion of the rise has been passed on at a local level.

The third chart below shows the change in basis levels. Our basis throughout the country has fallen week on week.

The full rise in futures has not been passed onto the local price. This is not surprising, and we wouldn’t really expect it to be, as there is a huge amount of risk in the market. A large and very welcome proportion has been passed onto producers, creating an opportunity for selling.