The wheat and corn market is highly correlated. They tend to move with one another due to their large degree of replaceability.
During much of last year, issues with the corn crop and demand from China were driving our wheat price higher. In recent months, wheat has been charting its own course.
In recent times the corn market has been falling, but the what market has gained strength. Since June, corn futures have fallen from 672 to 511¢/bu on the spot market. In the same time, wheat has risen from 667 to 697¢.
This shows that the wheat market is now operating on its own fundamentals instead of following corn issues—these issues such as the Russian downgrades, French quality issues and Candian drought.
The corn-wheat ration has dropped back to more normal levels in recent months, after trading at a premium to wheat for a short while.
Whilst wheat is currently following its own path; it’s folly not to follow corn. If corn continues to depreciate against wheat, that can still flow through to wheat pricing due to its inherent replaceability.
Feed buyers are liable to switch to cheaper alternatives where possible. This could reduce the demand for wheat.
Currently, wheat futures for December are trading at A$350, a considerable fall from A$388 during August.