Insights September 2023

Commodity overview

• There is increasing uncertainty around weather and crop outcomes heading into the critical spring development stage. Crop prospects could deteriorate further if spring conditions are drier and hotter than expected.
• China’s return to the Australia barley market has been swift with the first cargo leaving Australia a month after tariffs were dropped.

Seasonal conditions remain mixed across Australian winter cropping regions. The most recent forecast for total winter crop production is 45.2 million tonnes. This would be a decline of 34 per cent from last year’s record. Wheat production estimates have dropped three per cent from last month to 25.4 million tonnes. El Niño is still expected to develop which is increasing uncertainty around weather and crop outcomes for this season’s winter crop.

The lifting of tariffs on Australian barley by China has seen prices lift significantly across the country. China's return to the Australian barley market has had the most impact in the export-oriented markets of Western Australia and South Australia. Since the lifting of tariffs, prices for feed barley have risen by $30-$50 per tonne in these two states. The first shipment to China departed in late August. It is estimated that 1.2-1.5 million tonnes of barley have been committed to China since the lifting of tariffs. Local malting barley premiums also remain well supported on the return of China.

The Northern Hemisphere wheat harvest is nearing completion. Supply estimates for wheat have seen reductions in several key producing nations. The European Union Commission has downgraded its expectations for Europe’s wheat harvest to 133.3 million tonnes. This is down from last season’s 134 million tonne crop. The Canadian government agency, StatCan, estimated spring wheat would be down 14.5 per cent from last year to 22.1 million tonnes. These production downgrades have been offset by increases to Russian crop forecasts this season. This increase in the supply outlook for Russia is also being met with record export pace. Russian wheat exports for August are estimated at 5.3 million tonnes. This compares to 3.5 million tonnes last year and a historic average of 4.7 million tonnes for the month.

World wheat prices hit three-month lows in early September. This came on the back of falling wheat export prices in the Black Sea. Local prices continue to stay very resilient to offshore weakness. Basis (the difference between international and local prices) has risen between $28-$60 per tonne across the country over the past month. Physical demand in both the near term and for new crop remains very good. However, current dry weather has slowed new crop wheat sales across all grades. If these conditions continue to worsen, we will see wheat values continue to move higher.

Sources: Profarmer Australia