Insights May 2022
Insights May 2022
- Winter crop sowing is underway with favourable conditions for above average production.
- Wheat and oilseed prices continue to gain strength due to strong export demand and concerns around global supply.
Planting of the 2022/23 winter crop is well underway. Favourable conditions in most states has seen seeding speed up in recent days. Cropping regions in parts of South Australia, Victoria, and Western Australia are patchy and could use rain. But production prospects are positive for this time of year. Following last season's record plant, winter cropping area is still expected to decline. But the reduction of planted area is not likely to be as significant as first thought.
Global wheat and feed markets continue to be underpinned by conflict in Ukraine. However, markets are increasingly driven by the condition of US crops. Drought has affected US winter grain production, heightening global supply concerns. Volatility in international prices will remain until there is more production certainty. But even a best-case scenario for northern hemisphere crops will still leave global supply low. This would continue to support prices.
Export demand for Australian grain remains strong. Australian Bureau of Statistics data shows wheat, barley and canola exports are at record pace to the end of February. China remains Australia's largest consumer of export grains with 15 per cent market share. Traditional Asian destinations in Indonesia, Japan, and Philippines are also strong buyers. Australian exports tend to ease from July, but uncertain global supply will see ports at capacity through to the new season.
Australian prices remain at a discount to international benchmarks. Supply chain constraints mean Australia is not able to gain the full benefit of price rises in international markets. However, this does protect Australian prices from volatility. Wheat prices are pushing seasonal highs above $400 per tonne, reaching up to $500 per tonne in South Australia. Canola prices have surged back over $1,000 per tonne on the back of low global oilseed supply.
Elevated prices are expected to persist in coming months. Some levelling or downwards pressure may come should favourable conditions persist for the upcoming winter crop. But low global supply will not be resolved in the near term. The underlying fundamentals supporting grain and oilseed prices will remain throughout the year.
Sources: Profarmer Australia