What do the UK and Australia have in common?
Besides, that is language, and a love of rugby, cricket and TV soap operas?
The answer is an unusually large geographical divide in wheat prices areas – thanks to a mixture of weather setbacks and demand demographics.
‘Worst harvest since 1985’
In the UK, the wheat basis – ie, the discount of cash feed wheat prices to futures – is at its weakest in three years in Scotland and north east England, and far greater to that further south, according to the AHDB agriculture bureau.
Indeed, the premium of wheat in north Humberside over that in the major growing region of East Anglia is approaching £10 a tonne, more than double that a year ago.
That looks a reflection in part of harvest delays in the north from wetness, with one major commodities house reporting that “in Scotland, things have been moving at a frustrating pace with many north of the border declaring it to be the worst harvest since 1985” in terms of farmer hassle.
And this at time when the Ensus and Vivergo plants in north east England, which can swallow more than 1m tonnes of wheat each a year, have upped their game.
Agrimoney has heard talk that the geographic price divide is big enough that some traders are mulling hiring ships to take grain from south to the northern demand hub.
Export parity, or not
In Australia, the price gap between eastern and southern markets is even more marked, with Tobin Gorey at Commonwealth Bank of Australia telling Agrimoney of prices for Australian premium white wheat (APW) at Aus$227 a tonne at port in Adelaide in South Australia, which has seen a relatively strong harvest.
That compares with Aus$284 in further north at Port Kembla in drought-hit New South Wales, and prices even higher up again in Queensland, a major cattle feeding state.
“Eastern port pricing seems to have no intention, and perhaps no need, to fall to export levels,” Mr Gorey said.
“Prices at southern ports, where grain supply is more plentiful, are at export levels.”
And Nidera Australia, flagging a “supply and demand deficit in southern Queensland”, talked of higher prices in some areas, even for feed wheat grades.
“Bids for SFW1 and F1 delivered Darling Downs are quoted at around Aus$325 and Aus$315 a tonne for January delivery respectively,” the trading house said, values which
appear around import parity for higher grade supplies.
It added that such values are “certainly a huge incentive” for farmers in the area to “find prompt homes” for any wheat beyond that they may be keeping in storage in the hope of even higher values ahead.
Australia appears to be playing the same game as the UK, but on a whole lot greater scale.
Agrimoney, based in England, hopes this is not a harbinger for what awaits in the England vs Australia Ashes cricket tournament, which starts later this month.