Insights June 2022

Commodity Overview:

• Winter crop sowing is nearing completion with wheat production estimated at above 30 million tonnes.
• Grain prices are volatile, influenced by news affecting any changes to global supply.
• Australian prices remain discounted to international values due to supply chain constraints and positive production prospects.

Majority of the winter crop has now been planted. Wet conditions in parts of Queensland and New South Wales continue to delay planting. But at this stage, there is potential for above average production in all states. Given current conditions, wheat production is estimated to exceed 30 million tonnes.

Strong export demand for wheat is underpinned by Chinese demand. Wheat exports to China to the end of April are a record high 3.78 million tonnes. China's previous largest wheat imports for a full season totalled 2.39 million tonnes. Strong export demand is coming from traditional demand points in Asia (wheat), Middle East (barley) and Europe (canola). Demand is supported by tight global supply caused by conflict in Ukraine and poor northern hemisphere production.

International pricing remains volatile as markets respond to any news impacting potential supply. News Russia may allow grain exports out of Ukraine ports has softened global prices. At the same time, the poor condition of US crops has provided support. Australian prices are following the trends of international markets but remain at a discount to international benchmarks. Supply chain limitations prevent Australian exports from matching demand from importers. This situation prevents Australian prices from reaching parity with international prices however continues to maintain local prices near historical highs.

Australian grain prices will continue to experience volatility in line with international markets. Positive production prospects will maintain negative basis, a situation which will remain in the near term. Eventually, local conditions will come into play. Should production remain positive, prices will face downwards pressure from current levels. But tight global supply will ensure values remain at the higher end of historical prices.

Sources: Profarmer Australia