Insights September 2021
Insights September 2021
- Above average production is forecast for wheat, barley and canola despite some areas of concern.
- Positive production has Australia well placed to capitalise on strong export demand and high prices.
National wheat production is estimated at 30 to 31 million tonnes, barley around 12 million tonnes, and canola a record 5.5 million tonnes. Crop prospects remain positive across the country, but every state has areas of concern. Waterlogging is an issue in parts of some states, while dryness is a concern in others. Below average rainfall over most cropping regions in August was a relief for wet areas. Despite this, overcast conditions meant crops didn't get the sunlight necessary to maximise yield potential. Regardless of localised issues, at least average production is anticipated in all states. Crops are now heading into the critical spring filling period when frost and mice will be key risks.
Export demand remains firm but the focus of destinations has shifted. African wheat demand is being satisfied by European crops. This has seen Australian wheat heading to Asian markets led by Indonesia and Vietnam. Late season wheat exports are also supported by Chinese demand. Middle Eastern barley demand has eased from the peak shipping period, but has been offset by increased demand from Japan.
Grain prices remain above average in Australia as international factors support local values. Wheat harvest in the US, Europe and Russia is completed but corn and soybean harvests are upcoming. Corn and soybean production are having some influence on the broader global feed market which impacts wheat. However, the main driver behind strong cereal prices is Russia's wheat export tax. Russia have increased their export tax every week for the past two months. It currently sits at USD$46.50 per tonne due to high domestic demand, lower 2021 crop output and a stronger rouble. The general consensus is the tax is likely to remain around current levels until alternative supply is available. High global freight rates also give Australia an advantage into South-East Asian destinations.
The outlook for Australian crops in the upcoming season is buoyant. Prices are expected to come under pressure as harvest selling ramps up. But global wheat, barley and corn consumption are forecast to exceed production this season. With above average production, Australia is in the box seat to capitalise on elevated global prices and strong export demand.
Sources: Profarmer Australia