Due to the copious amounts of rain that Australia has received after the severe drought, crop production, including grains is shaping up to be bountiful. According to the latest statistical data, the regions are producing well-above-average production in the harvest year of 2021-22. In fact, Western Australia and New South Wales are forecasted to have a ‘bin buster’ season. Moreover, the grain growers are now focusing on expanding their potential export markets. It is also being reported that export and consumer shorts are gaining a good amount of access to stocks without difficulty. Hence, the new financial year seems to be going in favour of the grain growers.
As expected, global values have come under pressure in recent weeks on the back of harvest rolling out in the Northern Hemisphere and more grains entering the market. Surprises in the US Department of Agriculture (USDA) stocks and acreage report, and overseas weather concerns, have provided some bullish inputs to partially offset an otherwise bearish market period.
US winter wheat harvest has surpassed the halfway mark and, while much has been made of the extreme heat and drought conditions in the northern and southern growing regions of the country, the central and eastern zones received timely rainfall. The USDA had rated the winter wheat crop as 47 per cent good or excellent as of last week.
Wheat harvest has just started in the key export region of the Black Sea and, despite a less than the favourable start, yields are only expected to be slightly down from the five-year average. Russia is expected to dominate the wheat, grain export market yet again. High ocean freight rates are seemingly here to stay and, with an overall positive outlook for global wheat production, export competition is expected to be fierce this year.
Perhaps where the pricing opportunity for grains lies for Australian wheat growers is our freight advantage into Asian markets, and the ability to produce high protein-quality wheats. US winter wheat may have escaped the worst of the North American heatwave, but US and Canadian spring crops are in very bad shape. The condition of the US spring crop, 95pc of which is grown in the Northern Plains, was rated at just 16pc good or excellent last week. This was well down from 70pc last year.
The US spring crop produces a sizable portion of the region’s high protein wheat and, with protein levels reportedly low in the US Hard Red Winter crop to date, we may see a squeeze in high protein quality wheat that will hopefully extend into Australian markets.
Article by: Hari Yellina (Orchard Tech)