Market Morsel: Aussie wheat vs the world

Article courtesy of MARKET MORSEL | BY ANDREW WHITELAW , TEM

The other day I put together a short piece on the price of barley (grower bids) to our common destinations (see here).

I thought it was a worthwhile exercise to have a look at how our what pricing is comparing. It is important to note, is our Australian pricing.

Our pricing comparison is the grower bids, the price the farmer receives. It is then converted into free on board (loaded onto vessel), and then the freight to destination. It is not necessarily the traded price that the exporter is gaining.

However it does indicate the grower bid and the theoretical price to destination.

So again, we are using AgFlow datasets, for their freight, along with origin pricing. This gives us a cost and freight matrix – albeit a theoretical one (not a traded).

I have chosen Indonesia and China, as these are two of our important destinations. The origins are Russia and Ukraine, our biggest competitors.

Australian pricing is competitive compared to the other origins but relatively close to the pricing from the black sea nations.

It is important to note that buyers are facing larger risks in barley and, in reality, reduced destinations. What it does show is the difference between grower bids and the origin price.

The good thing is that there is hot demand for our wheat, and despite a big looming crop, we do not have to discount heavily.

NB This is a theoretical cost and freight matrix, which calculates the cost of purchasing wheat at different origins and the freight to get to a destination. In Australia, the price is a conversion of the value received by the grower if they sell spot. A CFR model should only be used as a rough guide. 

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