Insights October 2024

Commodity Overview

• Frost damage and a dry start to spring across many regions has impacted yield expectations. Expect to see national wheat production for 2024/25 fall to around or below 30 million tonnes.
• Australian grain prices gained some ground over the past month. However, with harvest just beginning and growers undersold, emerging bullish global fundamentals will need to be maintained to see local prices continue to rise into harvest.

In September, southern Queensland and northern New South Wales had average rainfall. This keeps these regions on track for an above-average crop season. In contrast, most other cropping areas saw below-average rainfall. While a wet winter raised hopes for a bumper crop in Western Australia, a dry September cut yield potential. However, late-month rainfall provided some relief. This aided grain fill and weight in later-sown crops, stabilizing yields. This rain will be enough to keep average production levels statewide. Frost in September harmed grain and oilseed crops in New South Wales, Victoria, and South Australia. Frost events in Victoria and South Australia were less severe, but moisture stress meant the impact was just as significant. By the end of the month the extent of the damage became apparent. Many growers are opting to cut crops for hay as a result. ABARES had earlier forecast a national wheat crop of 31.8 million tonnes. Some analysts speculated that yields could exceed 34 million tonnes. But ongoing dry conditions and frost damage may lower the crop size below 30 million tonnes.

Source: ABARES & ACF

The Australian grain marketing year ended in September. The ACF shipping report showed exports of 20 million tonnes of wheat, 7.9 million tonnes of barley, and 6.2 million tonnes of canola. Wheat exports were average. Barley and canola exports were above average. This has resulted in ending stocks for all three commodities being drawn down to multi-year lows. Coupled with deteriorating crop conditions, a disconnect is beginning to emerge between domestic and export markets. The final harvest size will determine the urgency of this transition. It will also affect how much we may need to ration export demand.

Source: ABARES & ACF

Global wheat futures gained around 10 per cent over the month to reach three-and-half-month highs. Key supportive factors include dry weather in Russia affecting winter crop planting, rising geopolitical tensions, and hopes that China's stimulus could boost demand. Global feed grain markets also saw gains, with CBOT corn futures rising 8 per cent during the month. This was driven by spillover support from wheat and dry conditions in Brazil, where planting is underway. However, with the US harvesting its largest-ever corn crop, global feed grains may see limited short-term gains.

Australian grain prices rose this month. Offshore markets and local weather drove this increase. Prices in Victoria and South Australia have developed a premium during this period, with new crop APW wheat bids $15-25 per tonne higher than Brisbane port zone prices, which are now trading close to parity with CBOT futures. Barley markets followed wheat higher. But, with less export interest, they lack wheat's market dynamics. Activity is slow on both the offer and bid sides. Market participants are preferring to wait and see how the harvest and export demand develop. Canola prices continue to be strong, with most port zones offering prices at or above $700 per tonne, equivalent to around decile eight levels. Despite these high prices, grower selling has been very slow. Production uncertainty persists in many areas. Widespread selling is unlikely until harvest begins.

Source: Profarmer Australia

Harvest is just beginning in Australia, but uncertainty remains around crop quality and yield. With growers undersold across most commodities, the market has yet to face significant selling pressure. Sustaining the bullish fundamentals emerging in global markets will be key to driving further increases in local prices. Ultimately, the final harvest results will determine market direction.