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Insights November 2020

9 November 2020 |Cropping
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Insights November 2020

9 November 2020 |Cropping
The November update provides an analysis of production and pricing trends for Australian broad acre farmers. It provides producers with a timely overview of current trends and an outlook for the coming months.

Overview

  • Unconfirmed reports suggest China may impose restrictions on Australian wheat imports.
  • Harvest is well underway in Queensland and New South Wales, activity is increasing in Western Australia and South Australia, and just getting started in Victoria.
  • Storms over parts of New South Wales caused localised damage to some crops. To date there aren’t widespread reports of quality downgrades, however the impact of recent rain may not be immediately known.

As harvest deliveries gather pace, results in New South Wales indicate yields are on track to achieve record wheat production for the state. Early deliveries of wheat in Queensland and northern New South Wales were of high quality, with majority making milling grades. Storms in late October over northern New South Wales and southern Queensland delayed harvest progress and raised concerns over potential downgrading of quality. Whilst there was some localised crop damage from hail and rain, there hasn’t been widespread downgrading of quality yet, and clear conditions since has allowed harvest to progress.

Unconfirmed reports have been circulating of China implementing a ban on Australian wheat imports. China’s Commerce Ministry has denied new directives, and the Australian Chamber of Commerce have stated they are unaware of any new measures, but markets have already reacted to the news. Chinese demand averages around 1.1 million tonnes per year, or eight per cent of all Australian wheat exports. The loss of Chinese wheat demand, whilst still a blow, should be readily picked up by other demand points in South East Asia, North Asia and the Middle East, particularly if it pushes prices lower.

The South Australian state government recently rejected a bid by local governments to keep in place a ban on Genetically Modified (GM) crops, predominantly aimed at GM canola. An independent review found that South Australia’s GM ban had cost grain growers at least $33 million over the last 15 years. Australia’s main export demand comes from the European Union (EU) where a ban on genetically modified crops is in place which may limit any switch to GM canola crops, however the process of gaining EU certification can be onerous on growers.

Offshore wheat markets have been volatile in the lead up to the US presidential elections, which is broadly a result of changes to the US Dollar as much as any particular influence on grain markets. In terms of the impact of US election results on grain prices, international grain prices tend to be determined by long term policy and trade rather than who wins the election. Whilst some volatility is likely to be seen in coming weeks, global weather and dry conditions across central Russia, Ukraine and parts of the US provide underlying support for international prices into the new year.

Local wheat prices were already under pressure from increased harvest selling before the rumours of a Chinese ban saw values drop $20 to $30 per tonne in most port zones. Prices have since stabilised as the industry awaits confirmation, but with harvest selling increasing local prices are unlikely to regain lost value. As harvest progresses and selling increases, we expect to see more downward pressure on wheat, barley and canola prices in the next month.

Sources: Profarmer Australia

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