Close shot of a grain field

Chicago wheat markets and grain sellers alike had a very ordinary Friday. Locally, prices quoted reflected the fall in the United States, but the basis has strengthened with weather outlooks seemingly discouraging selling.

A few factors came together on Friday to see wheat markets post a 4% decline to finish the week.  The USDA outlook posted a large increase in expected wheat acreage this year.  Figure 1 shows forecast wheat acreage in the US, which is up 8.5% for the 2023 cropping season. 

As reported in the Mecardo market comment on Friday the increase in United States acreage, and a return to normal yields, are expected to see wheat production increase up over 10%.  This, along with some commentary out of Russia about increasing exports was enough to see wheat futures crash lower.

In our terms, Chicago Soft Red Winter (SRW) Futures are sitting at $385/t on Monday, back at late January levels.  The Aussie dollar slipping under 69¢ has helped support values in our terms in the face of declining US markets.

Cash markets have held much better than SRW early this week.  Figure 2 shows Geelong Australian premium Wheat (APW) has declined but held at close to $420/t.  This pushed the Geelong ‘basis’, or premium to SRW to a new season high of $33/tonne.  There might be some support coming from the need to fill ships, but sluggish selling behaviour from growers will also be contributing.

The dry autumn forecast combined with lower prices, will always see growers hold onto their old crop, and resist selling the new crop.  Figure 3 shows the Bureau of Meteorology’s autumn climate outlook.  There is a low chance of above-average rainfall for almost all of Australia’s cropping zones.

Despite the fact Australia has had another record crop, a dry autumn will always see growers hold grain to take advantage of the expected ‘drought premium’.  After such a good crop, it won’t be a huge premium, but exports pace has been good this year, and the expected carryover isn’t huge.  This means there will be a growing premium if we have a light year for production.

What does it mean?

A seasonal basis high, even if prices are a little lower, is a good sell signal for those still holding onto wheat.  As outlined a couple of weeks ago, international prices are still historically strong, and there is some downside with a better cropping year in the US. 

There is still a 30% chance of a wetter-than-average autumn. Even close-to-average autumn rainfall would see the basis ease back.

Have any questions or comments?

We love to hear from you!

Print This Post

Key Points

  • A combination of US forecasts and Russian commentary saw wheat fall heavily on Friday.
  • Local prices have eased, but the basis at Geelong hit a seasonal high on Monday.
  • The dry autumn forecast is helping support wheat prices, but there is still downside possible.

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources: ABS, USDA, Refinitiv, Bureau of Meteorology,  Mecardo

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
Grains & Oilseeds

Bears in the new crop

This week has been all about the impending Northern Hemisphere harvest hitting the pipelines. Despite a raft of supportive news, the noise was drowned out

Read More »
Grains & Oilseeds

Canola wild ride continues

In the World Agricultural Supply and Demand Estimates (WASDE) released last month global canola and rapeseed production was forecast to remain at the upper end

Read More »
Grains & Oilseeds

India a demand dark horse

This week has seen the wheat market jump on cuts to Russian production, only to give most of the gains back as rains appeared in

Read More »

Want market insights delivered straight to your inbox?

Sign up to the mailing list to get regular updates to new analysis and market outlooks

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
Listen to the podcast

Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.

Photo of a farmer surrounded by Merino sheep in dusty yards
Research: Analysis of the Australian sheep flock

In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making. 

Image of harvested grain pouring into a chaser bin
SERVICES AND CAPABILITIES STATEMENT BROCHURE

We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.