Market Morsel: Are there golden rewards for quality?

Grain | 1st September 2021 | By Andrew Whitelaw

Market Morsel

I read an interesting discussion about whether it was worthwhile applying additional urea to get a protein response in wheat. At the moment, with fertilizer pricing being high (see here), that decision to apply urea is one that should not be taken without careful consideration.

The reason to apply extra urea at this time of year is to get the wheat into higher grades instead of yield benefit. I am told the yield benefit from urea applications is not as likely at this time of year, but I’m not an agronomist.

I thought it was worthwhile looking at the difference in spread between ASW and higher grades for Port Kembla and Kwinana.

The charts below take the average spread between H1/H2 and ASW for the November-December period.

The averages of the period 2010 to 2020:

  • Kwinana – H2 A$26 / H1 A$36
  • Port Kembla – H2 A$29 / H1 A$42

The protein premium, or ‘golden rewards’, is driven by the weather. The more extreme premiums tend to be driven by a wet finish when there is more downgraded wheat. Conversely, in a drought, premiums for protein are largely driven out of the market, as at this point, wheat is wheat.

Is it worth it to put down urea? That is dependent upon your view of protein spreads and the cost of urea. If it pours down and protein is scarce, it could be worth it; if the season meanders to a finish, then maybe not.

It might be worth using some of this data in your calculations with your agronomists to determine the value of any applications.

I had a quick look at some bid sheets from major buyers. The premiums on mutigrades are approx +A$3 for H2 and +A$15 for H1 in the west, and +A$5 and A$10 in NSW.

Is it worth it to put down urea? That is dependent upon your view of protein spreads and the cost of urea. If it pours down and protein is scarce, it could be worth it; if the season meanders to a finish, then maybe not.

There is also the question of scarcity of spring wheat in US/Canada, which could influence our premium – but I’ll leave that for a later article.

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Tags

  • Wheat