Global grain market rally pushes local prices to 5-year highs

International grain markets have rebounded from five-year lows amid recent weather fears in North America and Europe. CME Wheat has managed to break through a five-month trading range with prices rallying 20% over the last 10 days. Locally, wheat and barley markets are moving towards a five-year high as higher international prices, a depressed A$ and strong basis sees ASX Wheat Jan-16 futures above the A$325/t mark.

Key points:

• International wheat and corn markets have struggled to make a comeback after reaching five-year lows this year on the back of comfortable global supply.
• That said, this scenario has shifted considerably in the last week or so as the US winter wheat harvest is delayed by an overly wet weather and production/quality downgrades.
• As a result, CME Wheat Dec-15 futures have rallied US100¢, or 20%, over the last 10 days to see prices approach US600¢/bu for the first time since January.
• In percentile terms, international wheat markets have moved back towards their 40^th percentile after spending most of the last five months confined between the 5^th and 30^th percentile.
• Corn has also moved higher on the back of rising wheat prices, albeit by a more modest 10% over the last week or so. This puts spot prices at the 30^th percentile and the CME Dec-15 contract close to 40^th.
• When looked in A$ terms, international wheat markets are faring much better at around the 80-85^th level.
• Locally, ASX wheat and barley markets have also rallied as a result of firmer international prices. ASX Jan-15 Wheat has gained around $30 in the last two weeks to $327/t this Monday.
• With El Nino fears still priced into the market (strong local basis) and an A$ below US80¢, spot and new crop local prices are now faring close to their 5-year highs.      
• On the oilseed front, canola markets continue their recovery as the Canadian crop continues to be downgraded. Since late April, the ICE Canola Jan-16 contract has gained CA$82, or 18%, to reach a 22-month high of CA$524/t this Monday.
• In A$ terms, ICE Canola Jan-16 has posted similar gains and is now quoted close to A$560/t (73^rd percentile level). 

Read more about how to interpret and use percentiles