Market Morsel: Little reward for wheat protein.

Market Morsel

At present, there are strong premiums for high protein wheat around the world. Australia, however is just middling along.

The first chart below shows that the pricing for low, mid and high protein wheat futures in the US. Minneapolis continues to trade at a strong premium due to the drought conditions in the northern US.

The forecast for eastern Australia is for wet conditions for the coming three months. This is not something that we need during harvest (see here). A wet harvest tends to result in lower protein wheat.

The second chart shows stronger premiums during our west seasons. During periods of drought, wheat is just wheat, and the premium between grades starts to diminish.

As we approach the cusp of harvest, the premiums for H2 over ASW are sitting at A$7, and A$18 for H1. These levels are below where we would expect protein premiums during a period of likely wet weather and high protein demand overseas.

If we move forward into harvest and the BOM forecast rainfall eventuates, we expect these premiums to rise. If these premiums stay low throughout harvest, it may discourage chasing protein next year, whilst nitrogen prices are high.