Insights June 2021
Insights June 2021
- Dry areas of South Australia and Victoria received some rainfall in May which will assist crops establish. Other states remain on track for above average production.
- Wheat and barley prices are expected to come under pressure as the northern hemisphere harvest kicks off, however underlying support from low carryover and high demand will continue to support prices longer term.
Planting is around 80-90 per cent complete across the country. Conditions in Western Australia remain ideal with most of the wheatbelt receiving 50-100mm in May. Cropping regions in South Australia and western Victoria received 10-20mm of rainfall in late May. This should provide enough moisture for dry sown seed to germinate but follow up rain is required soon to encourage growth. Crops in northern New South Wales and southern Queensland remain in good condition. Soil moisture reserves remain available to emerging crops. Sentiment remains positive with average production achievable even in areas of low soil moisture.
Export demand remains firm for Australian wheat, barley and canola. ABS export figures show wheat exports of 10.7 million tonnes to the end of March is 55 per cent ahead of average exports. April and May are both expected to see over two million tonnes of wheat exported. Saudi Arabian demand continues to underpin Australian barley exports. Almost 700 thousand tonnes shipped in March took the season total to more than 2.1 million tonnes. In comparison, China’s average barley demand for the same period is 1.96 million tonnes. Barley exports to Saudi Arabia have softened with an estimated 400 thousand tonnes shipped in April and May. Demand from Middle Eastern nations is expected to decline further in coming weeks, due to northern hemisphere crops becoming available. Over 2 million tonnes of canola have been exported to the end of March according to ABS statistics. A sharp decline in canola exports is anticipated. A further 400 thousand tonnes shipped in April and May tightened stock available for export.
In recent drought years, Australia’s grain prices have been driven by domestic demand in eastern states. With increased exportable surplus this season, international markets have driven local prices. This is more prevalent in export focussed Western and South Australia. Since the start of April wheat prices have gained $30 to $50 per tonne then softened $10 to $20 per tonne, in line with Chicago Board of Trade (CBOT) wheat futures which have been following the condition of northern hemisphere crops. Positive reports on the European crop saw prices weaken. Forward canola prices remain near record levels due to ongoing demand for biodiesel and a tight global balance sheet.
Prices are expected to weaken as the European harvest gains pace. Increased stock availability will see demand for Australian exports ease. Once the northern hemisphere crop is known, local prices will start to take guidance from domestic weather, while low carryover stocks and high global demand should prevent significant price declines.
Sources: Profarmer Australia