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Insights May 2021

11 May 2021 |Cropping
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Insights May 2021

11 May 2021 |Cropping
The May update provides an analysis of production and pricing trends for Australian broad acre farmers. It provides producers with a timely overview of current trends and an outlook for the coming months.

Commodity Overview

  • Conditions remain favourable for winter crop planting in most cropping areas, though dry conditions in Victoria and South Australia are concerning.
  • Export demand remains firm as Australia picks up business normally supplied by Ukraine and the European Union.
  • Australian wheat and canola prices are strong, finding support from rallies in offshore markets following concerns around northern hemisphere production.

Sentiment is mostly positive for winter crop planting. Despite relatively dry conditions in April for all states except Western Australia, soil moisture remains average to above average for most cropping areas. The exceptions are South Australia and Victoria extending into southern New South Wales where soil moisture remains below average. Little to no rainfall has been received since the traditional start to planting on ANZAC day in these areas. Growers are dry sowing, but decent rainfall will be needed in coming weeks to improve prospects.

Domestic markets remain relatively subdued across the country. Near term demand has mostly been satisfied and end users are comfortable that stock will be available when needed.

Export demand remains very strong with exports of wheat, barley and canola to the end of March already exceeding the full season total of the two prior seasons. China’s massive demand for feed grains has seen them import an estimated 44 million tonnes of wheat, barley and corn, and an estimated 100 million tonnes of soybeans. This is placing strain on global feed stocks following reduced production in key exporting countries. Reduced production in Ukraine and the European Union has seen demand for Australian wheat capture market share with ten per cent of current season wheat heading to African destinations compared to around four per cent in an average season.

Saudi Arabia has effectively replaced the loss of Chinese barley demand. ABS figures show China’s average exports to the end of March total around 1.9 million tonnes, with Saudi Arabia taking 2.1 million tonnes this season. Thailand is an emerging market for Australian barley and exports this season to date have already exceeded their record full season imports. This demand is expected to be maintained in coming months as Australian barley remains competitive with Black Sea origins.

Domestic wheat prices have surged since the start of April on the back of a rally in offshore wheat futures. We are currently in between wheat harvests with northern hemisphere crops to come off in a couple of months and Australian harvest still six months away. This means the market tends to react to any weather events or news that may affect production. Dry conditions throughout the northern US Plains and freezing events in the US and Europe have raised concerns about the upcoming harvest and downgrading of Brazilian corn production estimates have provided support for wheat prices.

Canola values have shot to record or near record highs in the past month after a major frost event in Europe downgraded production estimates. China buying up record amounts of US soybeans and high crush margins have provided support for all oilseeds including canola. Canadian canola stocks are anticipated to end at record low levels and there are some concerns around dry conditions for the upcoming planting period. Current conditions of strong demand and dwindling stocks indicate elevated prices are likely to remain for the foreseeable future.

Export demand is expected to remain firm in coming months, however demand from destinations further afield is likely to ease once northern hemisphere crops become available.

Prices are likely to remain volatile in coming weeks as the market reacts to weather concerns, acreage estimates and any significant trade news. We do anticipate some softening and levelling out once northern hemisphere crops are harvested, however the underlying support of low carryover stocks and high demand suggests elevated prices will remain in the near term.

 

Sources: Profarmer Australia

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