Insights October 2023

Commodity overview

• Climatic conditions during September have thrown up many challenges for this season’s crop with frost, persistent dryness and high temperatures.
• Harvest of the 2023/24 winter crop has commenced in most states across Australia.
• Australian wheat prices fell slightly over the month as softer international prices kept a lid on local prices.

September has thrown up several challenges for this season’s winter crop. Widespread frost early in the month has caused damage to cereal crops. We won't fully understand the extent of the damage until we see harvest results. Dry conditions have spread further south on both the east coast and Western Australia. These effects combined have seen production estimates revised lower. Australian wheat production is estimated to fall within in the 23-25 million tonne range. Rainfall over the past week will help stabilise yields and shore up production in the upper end of that range.

Harvest has commenced in most states across Australia with conditions in stark contrast to last year. Growing season rainfall is below average for most regions. Additionally, temperatures were above average in September. As a result, this year’s harvest is several weeks ahead of last year. It is too early to get a good handle on the quality profile of this year’s crop. Early results are showing it is likely to be mixed due to the geographic spread and differing conditions across the country.

International wheat futures have fallen over the past month, pressured lower by strong supply out of Russia. Prices then hit three-year lows in late September when data showed that US wheat stockpiles were bigger than expected by analysts. These low prices have sparked some fresh demand with some significant sales of US made following the declines. Prices have since rallied 5 per cent off these lows indicating that US wheat is finally competitive at these values.

Australian wheat prices fell over the past month despite yield prospects declining. Softer international markets have kept a lid on local prices. After a stellar run since China re-entered the Australian market barley prices peaked in late September. Prices have dropped four per cent since then as international demand has waned. A large Chinese domestic corn crop and strong imports from Brazil competing with Australian feed barley into that market. Local canola values saw the largest decline this month falling around 5.4 per cent on the back of ample global supplies. European Union 2023-24 canola production was revised 0.6 million tonnes higher to 19.5 million tonnes. Strong selling pressure from Canadian growers is also a bearish influence on prices.

Sources: Profarmer Australia