Insights May 2020
Insights May 2020
- Wheat planted area is forecast to increase around 20 per cent year-on-year on the back of big jumps in New
South Wales and Queensland (75 per cent and 145 per cent year-on-year respectively).
- China is expected to propose a 73.6 per cent tariff on Australian barley imports in response to their ongoing antidumping investigation. If implemented, this will have significant impact on barley values.
Sowing is underway across Australia, as growers look to take advantage of what, for some, has been the best start for several seasons. Wheat planted area is forecast to increase around 20 per cent year-on-year, on the back of
big jumps in New South Wales and Queensland (75 per cent and 145 per cent year-on-year increases respectively). There has been good rainfall across most
states over the past month, and for those that didn’t there is increased chance of above average rainfall over the next two months.
Should favourable conditions continue, we expect new crop prices to fall as buyers gain confidence in supply. This can be seen in the 2020/21 season wheat price in Geelong, which has dropped from around $20/t to around
$50/t below current season prices in the past month.
Internationally, Chicago Board of Trade (CBOT) wheat futures have come under pressure. The International Grains Council have lowered estimates of total production for the 2020/21 season, however wheat production is still
expected to again reach new record levels.
Favourable weather forecasts have improved prospects for northern hemisphere crops as winter crops come out of dormancy, with US winter wheat in good condition and rain forecast for much or Russia where dryness was becoming a concern. Rising political tensions and threats of reintroducing import tariffs between the US and China are also contributing to weaker offshore markets.
Locally, on the back of COVID-19, bulk handlers in Western Australia and South Australia have started publicly publishing stock levels of wheat and barley.
Wheat stocks are starting to run thin, particularly feed wheat grades, with wheat carryout expected to be down around 50 per cent year-on-year.
Feed wheat is largely exported to South East Asian countries and tightening supply could see a contraction in export demand, offset in part by a lower Australian dollar. Barley stocks are more plentiful, particularly across
Victoria. However, in a blow for the barley industry, China is expected to introduce tariffs on Australian barley imports of up to 73.6 per cent. On average, China consumes 70 per cent of Australian barley exports at a value of 1.2 billion dollars per annum. The final determination is due on or before 19 May 2020, and, if implemented, could make Australia’s barley trade with China economically prohibitive.
COVID-19 restrictions saw concerns raised around access to inputs such as raw materials for chemicals and fertilizers. It seems that supply has been able to keep up with demand thus far, however continued demand following rainfall has kept pressure on suppliers. For some manufacturers of these materials, the early rain across the country presented more issues than other COVID-19
impacts, as incoming materials were out of sync with the early sowing programs across the country, and the size of sowing programs after successive droughts.
Source: Profarmer Australia