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![Global wheat stocks are historically tight which means Australian grain remains in demand. Global wheat stocks are historically tight which means Australian grain remains in demand.](/images/transform/v1/crop/frm/33nFNZ38FxtadDLYqv8sNRP/d2dfb6ff-ed5a-4933-88a3-b8d55fae7414.jpg/r13_0_2846_1591_w1200_h678_fmax.jpg)
As we approach the end of the year, let's recap wheat market fundamentals as they stand.
Global wheat stocks remain tight.
In fact, as per the United States Department of Agriculture's (USDA) online database, global wheat stocks-to-use are forecast to decline year-on-year to 32.5 per cent.
If we take China out of the global balance sheet equation because grain within China is largely unavailable to the world, the wheat stocks-to-use ratio shrinks to just 19.4pc.
The last time these ratios were this low was in 2007/08 when they reached 21.0pc and 17.7pc respectively.
Stock-to-use ratios reflect how much grain is stored versus how quickly it's being used.
For example, if stocks-to-use is at 20pc, it indicates we have 20pc of the year's consumption on hand, or 73 days.
The tighter the stocks-to-use ratio, generally the higher and more volatile prices can be given there is less of a buffer in global balance sheets to handle any production issues, hence why Australian grain, as a major global supplier, remains in demand and prices are at high levels historically.
If we look at the stocks-to-use ratio for the United States, its wheat stocks-to-use are estimated to increase from 51.5pc to 57.0pc year-on-year.
Further to that, if we look at US corn given it's a major substitute for wheat into feed rations, the US corn stocks-to-use ratio is also expected to increase from 11.2pc to 17.2pc year-on-year.
These major increases in the availability of US grain are part of the reason Chicago Board of Trade (CBoT) wheat futures have traded at much lower values relative to Australian grain in recent times.
A more relevant indicator of what Australian grain maybe worth, is what prices physical wheat is trading on the international market.
This data isn't always readily available, but we've tried to provide some examples through this column and the Clear Grain Exchange Market Open emails sent each morning to subscribers.
Recently China has been purchasing large volumes of US soft red winter wheat which is a similar quality wheat to Australian ASW1.
Based on quoted US export values for soft red winter at time of writing, these sales would equate back to about $415-$420/t FIS in WA and $390-$395/t track in eastern Australia.
Australian APW1, ASW1 and lower grade wheat prices have fallen in all parts of Australia except WA in recent weeks.
These figures would suggest they don't need to fall to remain export competitive.
Determine your price and offer your grain for sale.
- For more information or to see what values are trading contact Clear Grain Exchange on 1800 000 410 or email support@cgx.com.au