Insights February 2021
Insights February 2021
- National production estimates of wheat (32.1 million tonnes), barley (11.4 million tonnes) and canola (4.2 million tonnes) are the second highest on record.
- Australian wheat, barley and canola exporters are taking advantage of strong export demand, with bulk grain export stems mostly booked out to April.
- Local prices are being supported by international supply and demand factors but are expected to remain relatively stable in coming weeks, with some potential volatility in export focussed states.
Harvest is done and dusted for the year, and whilst the excellent performance of the New South Wales crop has been well publicised – 12.8 million tonnes of wheat, or 84 per cent of last season’s national wheat production – it has overshadowed Western Australian production where despite below average soil moisture and growing season rainfall, and less rainfall than last year, wheat production increased 48 per cent year-on-year and was three per cent above average. National wheat production of 32.1 million tonnes is 44 per cent above average and the second highest total on record behind the 2016/17 season. Similarly, national barley production of 11.4 million tonnes is the second highest total on record, an 18 per cent increase on average.
Whilst the United States Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) report has 2020/21 marketing year wheat production at record high levels, it doesn’t paint the whole picture. Of the three largest wheat producers in European Union, China and India, only the EU is a net exporter and production there was nine per cent below average due to poor crops in some areas. Where global import demand increased two per cent year-on-year, the combined production of the top five wheat exporting nations declined one per cent.
Australian wheat is in high demand with the squeeze in production in major exporting nations causing a shift in global supply chains. Russian wheat is in demand in markets normally serviced by the EU and Ukraine, which has re-opened markets in which Australia has lost market share in recent drought years. According to Bulk Handling Company (BHC) bulk shipping stems, Australia exported over 1.9 million tonnes of wheat in January, and season to date exports of 4.6 million tonnes is 28 per cent above average. South East Asian nations combined account for 1.8 million tonnes (38 per cent) of wheat exports season to date, including 780 thousand tonnes to Indonesia alone. However, the single largest destination for Aussie wheat to date is China, with 900 thousand tonnes, or 19% of bulk wheat exports. This includes over 700 thousand tonnes shipped in January alone, the largest amount of wheat shipped in a month to a single destination. China’s appetite is attributed to stockpiling activity after floods last year are understood to have damaged China’s grain stores, as well as a resurging pig herd which has also seen China buying large amounts of corn and soybeans from the United States
Despite the loss of the Chinese barley market, bulk barley exports out of BHC grain terminals are running at record export pace, with 2.4 million tonnes 50 per cent above average for the October to January period, with around six million tonnes expected for the full season. Saudi Arabia, a market lost to Australian barley in recent years due to low production and cheaper Black Sea origin grain is leading demand with almost one million tonnes, or 39 per cent of season to date bulk barley shipments. Season to date bulk barley exports to Thailand and Japan are also running at record pace, with 17 per cent and 13 per cent of barley shipped from October to January.
Local prices have remained relatively stable over the past month, though export focussed states have been more volatile being more closely aligned to international demand and receiving some support from the announcement of Russia’s increased export duty coming into effect on the 15th of February. Western Australian prices are up around $10 per tonne from the start of the month, and South Australia around $5 per tonne. Pricing in eastern states has remained fairly flat with domestic demand insulating local values from firmness in global futures markets. Barley prices have gained some value since the start of the year which can be attributed to strong export demand as well as China’s appetite for corn which is lifting all feed values globally.
Looking ahead, growers seem to have filled their appetite to sell, exporters have mostly purchased stock to fill near term shipping demand, and international influences have been factored into global pricing so prices are expected to remain supported, but relatively flat in coming weeks.