Global grain markets have surrendered to the reality that a large northern hemisphere harvest is virtually assured (losing 28 per cent since the end of May). The winter wheat harvest is almost complete, and a large summer crop harvest is rapidly gaining pace. Issues around the impact of wet weather on yields and quality of western European crops that supported prices during July, have been discounted by the market.
To give you an indication of how comfortable importers are, they shrugged off news during the week that Russia had destroyed grain loading facilities at the port of Odessa in the Ukraine and reports of poor crops across mainland Europe. The French wheat crop is estimated at 26.3mmt - a 40-year low - down 24 per cent on last year while German wheat production is expected to fall by 13 per cent due to too much moisture which reduced plantings and yields and hurt quality.
The tone was no better across oilseed and feed grains markets. Soybeans have shed over 20 per cent since the end of May, while corn values have lost a similar amount as the northern hemisphere crop manoeuvred through crucial yield forming stages without incident.
This chart shows Chicago Board of Trade (CBOT) grain futures prices. Source: CBOT.
Canola prices, which had been supported by European crop troubles have been in steep decline since mid-July, shedding around 20 per cent to fall in line with other parts of the global oilseed complex.
Wheat needs demand
With this year’s supply now known (the northern hemisphere grows about 80 per cent of global grain supply) it falls on demand to clean the bin and ensure that carryover stocks aren’t burdensome. So far, demand appears better – US wheat export commitments which are the best gauge – are up 26 per cent on last year, but not enough to spark a rally.
Through the week Egypt tried to tender for its entire year’s supply of wheat in an unprecedented 3.8 million tonne (mt) tender. But traders didn’t like the long payment terms and adjusted prices accordingly - which didn’t work for Egypt. Only 280,000t ended up being awarded to Ukraine and Russian suppliers at season low prices with negotiations ongoing for further purchases of around 1.8mt from Russian suppliers. This suggests that buyers like the price but think they hold the upper hand in negotiations and want concessions to commit to above normal purchases.
To spark a price rally, we will need to see large purchases from big customers like India and China. India hasn’t imported significant quantities of wheat for 6 years due to a 40% import tax. Domestic wheat prices in India continue to firm as stocks have been drained by 3 successive poor harvests but the Government remains committed to its import tax. China, the world’s largest importer, cancelled large export orders for Australian wheat in March due to the sharp fall in global prices and is most likely sourcing its grain from cheaper suppliers. The lack of Chinese buying suggests Australian wheat is not competitive in global markets outside of nearby Asian markets as per the chart below.
This chart shows wheat export FOB bids from major global wheat suppliers. Source: International Grains Council
Local grain markets take on interesting shape
Local wheat markets have taken on an interesting shape. Currently Victorian new crop prices are trading at a premium to northern markets which is highly unusual and reflects the seasonal difficulties being experienced in southern markets.
The Victorian crop, in contrast to NSW, has been mediocre all year and the forecast rainfall last week didn’t materialise. Given the poor crops, lower grain prices and the lack of stockfeed in the south, without good rain soon, some crops across south-east SA and north-west Vic and south-west NSW will be cut for Hay.
This chart shows the value of 23/24 crop APW wheat at major Australian ports. Source: ProFarmer Australia.
Victorian consumptive markets are pricing grain off Griffith plus freight. In the north, Brisbane is trading evens with Newcastle which suggests the market is confident of a significant exportable surplus. For the first time in a while, northern feed grain consumers hold the whip hand, and the grower looks like they will have to meet the market at some stage.
WA grain prices are reverting to trade at prices in-line with east coast as the crop becomes more assured. Grains Industry of WA (GIWA) is reporting that for most regions and most crops, yield potential has improved to above average.
This chart shows rainfall deciles for the southern wet season to date. Source: Bureau of Meteorology
In-crop rainfall has favoured central and northern cropping areas while parts of the Great Southern and Esperance are well down on average annual rainfall. Cereals have benefited the most from the step up in rainfall, particularly where conditions at establishment were favourable and crops established evenly.
Canola pressured by international markets despite crop concerns.
This chart shows the value of 24/25 crop GM canola at major Australian ports. Source: ProFarmer Australia
Local canola markets are thinly traded. The Aussie grower continues to stand aside leaving price discovery up to the trade as the market grapples with potential new crop supply. As tends to happen most years, rain continues to follow a similar path, favouring NSW crops and leaving crops across Vic and SA needing the pattern to change as we move into the warmer months.
On the west coast, Grains Industry of WA (GIWA) reports that Canola is going to be down on yield in all areas other than the south coast, the western part of the Albany port zone and the west coastal regions where the lack of waterlogging is going to result in high whole paddock yield averages. In all other regions, canola crops are either too late, too patchy, or both to achieve anything other than average or below average yields.
This table shows grower trade bids for grain in major Australian grain markets.
Agronomy Update
There is not much to report from an agronomic point of view. Crops in most areas are in winter dormancy with soil moisture profiles gradually building and agronomists busy assessing yield potential and crop disease and formulating treatment plans for a little further down the track.
Crop ratings were unchanged from last report with the best crops on the Northern Tablelands and north west where around 80 to 90 per cent of the crop has above average yield potential.
Further south on the Central Tablelands and Central West ratings were a little lower with around 80 per cent of crops on track to achieve above average yields. The proportion of crop that is at risk of not being harvested is around 10 per cent.
State Technical Services Manager Adam Little said, “I expect some of these crop ratings to deteriorate as we move into spring.
“I’ve received calls this week about barley yellow dwarf virus from northern areas down to central NSW. There is some rust in crops. The biggest issue I can see is that it’s too wet and growers will have trouble accessing crops to get the timings correct on crop treatment.
“We are expecting another 40mm across parts of NSW this week. Canola looks good with 80 per cent average or better yield potential and chickpeas are doing okay given the wet with some Ascochyta Blight emerging.”
Crops continue to struggle through lack of moisture and poor establishment. While crops were in the balance through July, crop ratings have now slipped with most crops now headed for below yield potential with the spring to determine the extent of yield losses.
Only around 10 to 20 per cent of crops in the south (Adelaide, Fleurieu Peninsula and the south east) have the potential for average yields while around 20 to 40 per cent of crops are at risk of not being harvested.
The hardest-hit crops in the state are in the Mid North where only 20 per cent of crops are in fair condition but some 80 per cent of crops are at risk of not being harvested.
Things are a little better on the Eyre and Yorke Peninsulas with 20 to 30 per cent of crops with normal yield potential with the balance of the crop currently below normal yield potential with final yields to be determined by spring weather. Around 20 per cent of crops may not be harvested through these areas.
The information contained in this article is given for the purpose of providing general information only, and while Elders has exercised reasonable care, skill and diligence in its preparation, many factors (including environmental and seasonal) can impact its accuracy and currency. Accordingly, the information should not be relied upon under any circumstances and Elders assumes no liability for any loss consequently suffered. If you would like to speak to someone for tailored advice relating to any of the matters referred to in this article, please contact Elders.
Read previous reports
Cropping update - July 2024
Cropping update - June 2024
Cropping update - late May 2024