Harvest is about to ramp up, and with harvest comes harvest pressure. There has been little to get excited about in international markets for grain and canola producers, here we take a look at the local level and whether we will indeed see harvest put further pressure on prices.
The government shutdown in the US means the United States Department of Agriculture (USDA) isn’t producing the World Agricultural Supply and Demand Estimate (WASDE). If you go to the website, you’ll see it described as the “Radical Left Democrat shutdown.”
Chicago Soft Red Wheat (SRW) futures have been either edging lower or tracking sideways in recent times, as the market flies a bit blind without the usual flow of data and information. Figure 1 shows that ASX wheat has similarly been steady since a jump at the end of September.
Such little movement in prices is unusual for this time of year, but the forecast of a large crop and relatively benign weather leading up to harvest has left prices in a holding pattern.
Figure 2 shows ASX basis to SRW. In this case, basis is the premium or discount of ASX wheat to SRW, and we can see that at $34, basis is at the top end of the range seen since the middle of 2024.
The potential for stronger wheat basis seems limited. Despite some conjecture that the crop might not reach the forecast highs, there will still be an exportable surplus. This keeps prices at a level that can compete with other exporting countries, the cheapest being in the Black Sea region.
Canola markets remain very strong. There isn’t an 8 in front of east coast values, but in the west prices have been $800 plus in recent weeks. Figure 3 shows Geelong canola prices, along with ICE and Matif futures.
Trade issues between China and the US have weakened ICE futures, which are based in Canada. The Geelong GM price sits at $713/t, a premium to ICE, and much closer to conventional here than it was last harvest.
Barley prices remain a little weaker than $300/t, having fallen since the strong winter local feed demand dissipated. Demand for barley remains good, but with an exportable surplus expected to be produced, it’s difficult to see barley closing the gap on wheat.
What does it mean?
With wheat basis at the upper end of the recent range, there is room for it to ease lower with some harvest pressure. It’s probably more of a concern for canola, often the first crop harvested and, with historically strong prices, the first to be sold for cash flow. There might be some merit in taking some prices now for harvest deliveries of canola
Key Points
- Harvest is approaching, and wheat prices are at a premium to international benchmarks.
- There is some scope for prices to weaken as harvest sales are made.
- Canola prices are historically strong, and with likely have strong sales pressuring prices
Click on figure to expand
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: CME, ASX, Bloomberg, Mecardo
