Insights August 2024

Commodity Overview

• Grain and oilseed markets are expected to remain under pressure in the near term as global supply is broadly satisfactory. This will continue to moderate prices, with any new developments having short-term impacts.
• Market participants are now forecasting an Australian wheat crop in the range of 32 to 34 million tonnes. This is well above official estimates of 29 million tonnes.
• If higher end crop projections are met, local prices will be influenced by international futures markets as this extra supply will need to compete into export markets.

Global wheat futures continue to decline as the Northern Hemisphere harvest progresses. Despite facing production cuts, Russia's wheat harvest is now past halfway. It is still expected to be their fifth largest crop ever, at 83 to 86 million tonnes. In the US, winter wheat harvest is nearly complete with reports of favourable yields and quality. Their spring wheat harvest is just commencing and is off to a strong start, with excellent crop conditions and above-average yields expected. This increase in near term supply has seen Chicago wheat futures fall to multi-year lows over the past month. Local prices haven’t been immune with APW prices down an average six per cent across the country.

Corn and soybean markets are under pressure due to high Brazilian supplies and a likely record US harvest for both crops. US corn has mostly passed its key growth stages. Early August's good weather is boosting soybean yields, as this month is crucial for yield. This abundance of global feedstocks is weighing on barley prices. While for oilseeds, soybeans, the dominant component in the global oilseed complex, are exerting downwards pressure on canola prices. However, adverse weather in the Black Sea and eastern Europe has cut global canola supplies. Therefore, canola prices will remain volatile. This will see pricing opportunities arise as we head into harvest.

Favourable Southern Hemisphere growing conditions are also exerting downward pressure on wheat futures. Some analysts project Australia's wheat crop at 32 to 34 million tonnes. New South Wales and Queensland are on track for significantly above-average yields. However, yield and production uncertainties persist in other states. July rain has improved yield prospects for Western Australia. It has raised expectations to near average levels. South Australia and Victoria have had some rain. But subsoil levels still need to be replenished before spring. As a result, final yields are uncertain. If spring conditions worsen, production may decline to 26-27 million tonnes.

Ample global wheat supplies coupled with subdued demand are driving prices lower. Turkey's recent imposition of a wheat import ban until at least October has forced Russia to seek alternative markets for its large crop. As a result, Russian wheat exports declined by 29 per cent year-on-year in July. China's wheat demand has softened due to economic challenges. They are affecting the food and feed industries. However, as is typical in periods of low prices, buyers are emerging to secure bargains. Egypt's recent announcement of a record-breaking 3.8 million tonne wheat tender for October 2024 to April 2025 delivery is a prime example. This massive purchase triggered a modest price rally and provided temporary market support.

Grain and oilseed markets are expected to remain under pressure in the near term as global supply is broadly satisfactory. This will continue to moderate prices, with any new developments having short-term impacts. As our crop conditions become clearer in late August and September, local prices may shift. They could move higher or lower, depending on the forecasted supply. If higher crop projections are met, local prices will be affected. The extra supply will need to compete in export markets. So, prices will be influenced by international futures markets.

Source: Profarmer Australia