Insights February 2022
Insights February 2022
- Australia is on track to export a record volume of grain this season with tight global supplies increasing demand.
- China will now allow imports of Russian cereals from all regions which could impact Australian exports in future seasons.
- Prices have stabilised with harvest pressure no longer weighing on markets.
Record wheat, barley and canola production this season and robust demand has set Australia up for a strong export year. Global supply remains tight due to poor production in the United States and Canada. Statistics Canada had Canadian canola stocks at the end of December at 7.6 million tonnes, down from 13.3 million tonnes in December 2020. Canadian wheat stocks were at 15.6 million tonnes, a year-on-year decrease of 38 per cent. Export duties on wheat, barley and corn out of Russia is further impacting trade flows.
China has agreed to allow imports of Russian wheat and barley from all regions. Imports were previously banned due to phytosanitary concerns. This won't have a significant impact in the current season but could impact Australian exports to China in subsequent seasons. Australia is likely to export 2.5 to 3 million tonnes of wheat to China this season. This is not a large volume of wheat for an exporter like Russia to absorb considering they export 35 million tonnes of wheat a year. Losing market share to Russia will impact exports, but there are other demand points in Asia.
Quality has been a big talking point this season due to low high-protein wheat stocks worldwide. Australia has been able to benefit from this demand with strong pricing for higher protein grades. Unfortunately, around 60-65 per cent of the New South Wales crop was downgraded to feed due to harvest rainfall. Victoria and South Australia received decent levels of hard grades. Overall, Australia is down on protein.
Wheat prices have stabilised with harvest selling pressure no longer weighing on markets. Recent strength in offshore futures markets has also been supportive. The February update of the USDA’s supply and demand report saw wheat futures rally. Global wheat end stocks were reduced due to lower global production, increased consumption and trade. Logistical constraints will be what limits Australian exports with shipping slots booked out. We expect Australian grain prices to stay supported in the near term due to this strong demand.
Sources: Profarmer Australia