Australian wheat futures resume trading on CME amid better crop prospects

New York —
The CME’s Australian wheat futures resumed trading on Sept. 10 after a gap of around 10 months, with 200 lots of Australian Premium White March 2021 futures contract traded at $246/mt, according to the exchange’s website.

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The last trade on the CME’s Australian Wheat futures had taken place in November 2019, according to S&P Global Platts data.

“We have seen a significant increase in inquiries for the CME-listed Western Australian Platts FOB contract from both existing and new participants. We believe it is a great tool for those who want exposure to the Australian market, either as a hedge or simply to express a market view, especially relative to competing origins,” said Nick Orssich from StoneX, the brokerage firm who facilitated the deal for the 200 lots, or 10,000 mt of APW wheat.

The CME’s futures contract is cash-settled against the monthly average of S&P Global Platts APW Wheat assessment on an FOB Kwinana basis.

The March futures contract corresponds to wheat loading during the months of May and June 2021. This indicates the market expects a long export season in 2021.

Dry spell

Trading on the futures contract dwindled due to smaller crops and lower exports from Australia.

Australia suffered three years of consecutive droughts which caused its exports to shrink by almost half to an average of 11.8 million mt/year for the past three marketing years, compared to the 2016-17 marketing year (October-September), when it exported 22 million mt, according to the US Department of Agriculture data.

The 2020-21 marketing year’s production is forecast to reach 26 million mt, up 71% on the year, the USDA said.

However, Australian traders estimate the crop to exceed 30 million mt, which would make this marketing year’s crop the second largest on record after the 2016-17 marketing year, at 31.8 million mt.

Return to competitiveness

Australia is one of the top wheat exporters in the world, with Southeast Asia being the top buyer of Australian wheat.

However, in the past three years Australia has lost significant market share to cheaper origins such as Black Sea and Argentina.

“After the last three years of crippling drought, the larger wheat crop this year will dramatically increase the relevance of Australian wheat on the international market. We now see Australian wheat competing again for export homes against stiff competition from the likes of the Black Sea region and Argentina,” Orssich said.

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