Insights April 2021
Insights April 2021
- Heavy rainfall over Queensland and New South Wales has been mostly beneficial for winter crop planting.
- Winter crop sowing is underway in some areas with anticipated trends expected to see increased planting of canola and pulses, and a reduction in area planted to barley.
- Export demand for wheat and barley remains strong but is expected to decline in the second half of the year.
- Australian cereal prices are expected to soften in coming weeks as confidence in northern hemisphere crops improves.
With the opening of the winter crop planting window broadly recognised as Easter, sowing of canola, pulses and winter grazing cereals is underway in some areas. Heavy rainfall over parts of southern Queensland and much of the New South Wales cropping belt has negatively impacted some summer sorghum crops, but for the most part have been beneficial for soil moisture. Soil moisture across much of southern Queensland, New South Wales and Western Australian cropping regions is as good or better than this time last year. Western Victoria and most of South Australia remains dry and growers will be waiting on a decent rainfall event before sowing begins in earnest.
Buoyed by early soil moisture and high prices, area planted to canola is expected to increase in all states and will potentially see a record amount of canola planted. Increased area planted to canola and pulses will likely come at the expense of hay and cereal crops. Barley planted area is forecast to be down year-on-year due to the loss of Chinese barley demand, with this trend likely to be more pronounced in export oriented Western and South Australia as barley’s higher yields make it a popular feed crop in eastern states. Area planted to wheat is expected to remain largely unchanged as prices have held up on the back of strong export demand, with potential for minor increases or decreases in areas dependent upon local conditions at time of planting. These expected trends will be confirmed or refuted as planting progresses in coming weeks.
Wheat exports of 8.5 million tonnes to the end of February is the second fastest pace on record, 56 per cent above average but 11 per cent below record wheat exports in the 2011/12 season. Reduced production in the European Union and Ukraine has seen Australian wheat recapture market share in traditional Asian destinations but has also seen a larger geographic spread than in recent drought years with increased demand from African and Middle Eastern nations.
Barley export pace to the end of February is also second highest on record. A total of 3.6 million tonnes exported is 43 per cent above average and only six per cent behind the record 2016/17 season. Saudi Arabia has taken 1.5 million tonnes of barley to the end of February, which is on par with China’s average consumption. Barley exports are also supported by strong demand from Thailand, where exports to the end of February are only ten per cent behind record full season exports.
Wheat prices have tracked mostly sideways since the start of the year but dropped off around $25 per tonne in mid-March following positive reports on the condition of northern hemisphere crops. Despite the decline, prices continue to hold up on the back of strong export demand and remain comparable to average historical prices. In Western and South Australia prices are more closely aligned to international prices, and APW wheat is fetching around $285 to $300 per tonne which is slightly above average.
Barley prices continue to follow wheat’s lead and have clawed back some value relative to wheat, but feed barley prices remain at a $30 to $50 per tonne discount. The barley market remains stagnant as buyers have covered nearby demand and are happy to let prices slide, whilst sellers are content to hold on to tonnes until prices recover.
Canola prices remain at very high levels in Western Australia, where prices reached record highs of over $700 per tonne. The global oil complex is being supported by high crush margins, China buying up record amounts of US soybeans, a poor European crop and limited export surplus in Canada. This has conspired to see global prices reach record highs, with Australian prices following suit.
Export demand is expected to remain firm through to June as evidenced by grain port capacity being booked out until then. From July onwards exports are forecast to decline as above average production in Russia and European Union will recapture demand, particularly into regions Australia doesn’t enjoy a freight advantage.
Wheat and barley prices are anticipated to remain fairly steady in coming weeks but soften as certainty around the condition of northern hemisphere crops and local planting conditions put downwards pressure on prices.
Sources: Profarmer Australia