Market Update 02/07/10

 
Daily CBOT in A$/mt 28/04/2008 - 12/08/2010 (CHG)
Price
Line, QWc1, Last Trade(Last) AUD
02/07/2010, 209.19 MTU

350

Note the sharp spike in the  340

CBOT wheat value in A$/mt  330

320

310

300
290

280

270

260

250

240

230

220

210
209.190

200
190
.123
May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Au
Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 10
[Delayed]
 
 
CBOT Wheat ‐ In the past two day’s we have seen the CBOT wheat market rally above 40c/bu (or US$14.70/mt), thanks to 
the revised acreage planting for corn (off 1million acreas) and lower than anticipated corn stocks. Hence, wheat has rallied 
on  the  coat  tail  of  corn  which  presents  an  opportunity  for  new  crop  marketing.  There  was  no  significant  news  that 
suggested that wheat should have rallied given that the US report was in fact bearish for wheat. This along with the sharp 
fall in the AUD over the past two days has led to a sharp rally in the new crop wheat swap value as represnted in the chart 
above.  
 Will the international wheat market continue to rally – well, this is anyones guess, although along with the current 
excessive world wheat stocks and current production profile (although slightly revised down with production concerns in 
Canada, Europe and the Eastern blocks) one would expect the CBOT wheat market to be restricted trading to much higher 
with the current burdensome supply of wheat world wide. 
 
 
Calcs for PNW Export Parity
CBOT Wheat 5.21 Dec
FOB Basis - US PNW -0.18 Z
Wheat FOB US PNW 5.03
SWW Wheat FOB PNW 185.00 US$/mt
Freight US to Japan - Panamax 35.00 Dec/Jan
Wheat C&F Japan - Panamax 220.00
Freight Aust.Japan- Panamax 22.00 Dec/Jan
Equivalent Value FOB Australia-US$/mt 198.00 Dec/Jan
Exchange Rate A$/US$ 0.85 Dec
Equivalent Value FOB Australia 233.85
Equivalent Value "Track" Spread 28.50
Equivalent Value Track Australia 205.35 Dec

Advance Trading Australia | Special One Grain 1

 
 
 
Australian Wheat Export Parity – The Australian new crop APH wheat value has risen on the back of the recent rally in the 
CBOT  market.  Assuming  the  US  SWW  wheat  PNW  (Pacific  North  West)  is  trading  at  US$185/mt  (see  table  above),  the 
implied  export  parity  (the  implied  minimal  price  for  APW  wheat)  for  APW  sold  out  of  Australia  for  Dec  2010  is 
A$205.35/mt. With the local market currently trading at $218/mt, there is currently a domestic $13/mt premium to export 
parity (difference between $205 (export Parity) and $218 (current APW track price)). 
 
The  market  is  suggesting  an  opportunity  for  selling  new  crop  wheat  with  the  current  spike  in  the  wheat  market.  The 
current rally in the CBOT futures, softening A$ and slight basis premium in the domestic new crop wheat market all points 
to a selling opportunity. If we also assume a small carryover stock increase this year in Australia, domestic cash prices can 
come under pressure if we see a plus 22mmt wheat crop. This analysis is also supported with the Australian Meteorologist 
suggesting a “La Nina” event on the East Coast of Australia. More rain, more grain? 
 
Special One Grain has just released its ECP No:2 which seems timely given the recent market movements in the past week. 
Growers wishing to take full advantage of the market rally please complete the expression of interest and fax back to head 
office on 02 68281249 ASAP. 
 
 
 
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