Market Morsel: Wheat discount to continue?
One of the topics discussed at length in recent times is the Australian discount for wheat to futures.
The biggest factor which dictates whether we have a premium or discount to Chicago wheat is the size of the crop. A big crop and its discounted, a small crop and a large premium emerges.
The Australian crop is set to overall be a large crop in 2022/23. The first chart below shows the basis levels over recent weeks, and values continue to be discounted.
The majority of the wheat crop is generally sold between November and February, and I thought it was worthwhile looking at how our basis compares for the November period when selling will ramp up.
Last year the discount blew up to the largest November discount since at least 2010. The current basis levels (especially Kwinana) for September are close to last year’s November level.
The likelihood is that Australian values will continue to be discounted to futures values through this harvest.