The rally in global wheat values stalled the past month on improving northern hemisphere growing conditions and only routine demand. The market is waiting for European exports to slow and for demand to shift to North American and southern hemisphere suppliers (Australia and Argentina).
The tone is better in corn and oilseed markets where increased buying by China ahead of possible tensions with the US has offset the impact of large US crops and improving conditions across South America.
This chart shows milling wheat futures prices in $A per tonne on US and European futures exchanges. Source: CBOT and MATIF.
Canola has been the standout performer and higher prices have been met by farmer selling. Likewise, chickpeas in the north, where the industry has focused on getting these harvested, sold and shipped ahead of the next sub-continent crop due off in February.
Trump impact
Like with all other markets, commodity markets are trying to determine the impact of a Trump Presidency. Some points to note:
- Tariffs may be negative for global growth and inflationary for US
- Tensions with China would potentially slow growth longer-term but may send some demand to Australia (canola and barley)
- Biodiesel will be out of favour potentially affecting demand for corn and oilseeds
- A stronger US dollar would make US grain less competitive in export markets but reduce grain prices
- Inflation will generally be positive for commodities
Wheat rally stalls as northern hemisphere crop conditions improve
The rally in global wheat prices stalled the past month as northern hemisphere winter crop conditions improved and demand remained subdued. This is despite Russian Government controls on wheat exports, which has sent business in the direction of other European exporters such as Ukraine, Bulgaria and Romania.
Wheat importers remain well supplied out of Europe with north American and Australian suppliers sitting on the sidelines waiting for supplies from lower cost suppliers to be exhausted. Argentina have reportedly been making sharp offers to win export business as it prepares to harvest its crop.
Local growers seem content to store wheat and sell canola, chickpeas and barley to generate cash flow. The lack of wheat vessels on the shipping stem is telling. Wheat values of A$370 per tonne Free-in-store WA have been flat this past month, moving up and down with changes in the Australian dollar. Similarly, east coast values at around A$340 per tonne port have been stable in the north but have contracted $15 to $20 per tonne across southern port zones with the domestic premium eroding as the trade becomes more comfortable about supply.
This chart shows the $A per tonne price of 24/25 APW1 wheat in the Kwinana (FIS) and Geelong (track) port zones. Source: Clear Grain Exchange.
Government controls slow Russian wheat exports
One of the most significant developments in the past month is the Russia Government’s imposition of greater controls on wheat exports.
Russian wheat exports had been flying out the door at low prices and the Government has been under pressure from the domestic milling industry to guarantee supply.
The Government held a meeting with exporter and responded with a series of measures including increased export duties, a minimum export price and barring Russian exporters from dealing with third parties.
As a result of these restrictions the Egyptian/Russia supply deal seems to have fallen over. A deal to ship Russian wheat negotiated in September wasn’t executed and Egypt was back out tendering in early November with successful bidders Ukraine, Bulgaria and Romania. Russia bids submitted at the minimum price were above the successful bids.
Feed grain prices improve on US export demand
Corn and global feed grain markets have had a better tone. A very hot end to the summer growing season crimped production across eastern Europe while exports out of South America remain well below year-ago levels. This has seen US exporters take advantage of increased buying out of China.
Brazilian corn exports for October (6mt vs 8.5mt last yr) were well below last year’s level, explaining improved US export demand and the strength in US corn futures. Not sure if this is short-term and related to logistical issues caused by low Brazilian river levels (recent rains have largely alleviated this issue) or related to better storage systems and increased domestic demand across South America. We will keep an eye on US and South American corn exports as they will set the tone for global demand for Australian feed grains (barley and sorghum).
Domestic feed grain demand remains robust with Australian feedlots at full capacity and with southern producers looking at establishing containment yards to assist with grain finishing stock, given the relative attractiveness of restocker values. Feed barley is trading steady at A$320 per tonne free-in-store WA ports and around A$300 to $310 per tonne east coast port. Like with wheat, southern feed barley values have lost the domestic premium as harvest selling ramps up.
This chart shows the $A per tonne price of 24/25 feed barley in the Kwinana (FIS) and Geelong (track) port zones. Source: Clear Grain Exchange.
Good but not great
Australian harvest is well underway with yields reportedly better than expected, with some quality issues related to high screenings due to the dry Spring and frosts.
Some crops across the South have been cut for hay due to frost damage and low grain production potential.
The US Ag attaché has recently estimated the Australian crop at 28.5mt for wheat, 11mt for barley which are both lower than current USDA forecasts of 32mt wheat and 12.2mt for barley. Rabobank has forecast the canola crop at 4.7mt (down 21 per cent on last year).
Malaysian palm oil drags oilseed complex higher
The oilseed market has been similarly influenced, with China buying up US soybeans on less export competition out of South America and ahead of possible tensions with the US.
Canadian canola has benefitted from increased Chinese buying as talk of retaliatory import restrictions on Canadian canola are imminent. Canadian exports to China are currently running at double last year’s pace. The Canadian Agriculture Minister is in China to discuss the canola trade this week.
Also aiding oilseed markets has been a lift in palm oil values which has lifted the tide under all veg oils.
A smaller Australian canola crop coupled with crop losses across Europe which will increase its import requirement augurs well for local prices.
Owing to the relative attractiveness of canola prices, Australian farmers have been willing sellers with reports export business has been recently booked out of Australia for the European Union. Prices for canola eligible for the EU have increased to A$887 per tonne Free-in-store WA and A$817 per tonne port Geelong up A$60 to $75 per tonne. The premium for EU eligible canola ranges from A$60 to $105 per tonne.
This chart shows the $A per tonne price of 24/25 EU and non-EU canola in the Kwinana (FIS) and Geelong (track) port zones. Source: Clear Grain Exchange.
Palm oil hits contract highs
Lifting the tide under global vegetable oils has been a sustained rally in Malaysian palm oil which has lifted to 2.5-year highs on lower production through South-East Asia and increased buying by Indonesia (due to lift in biofuel mandate) and India (to replenish stocks).
The lift in Indonesia’s biofuel mandate from 35 to 40 per cent is expected to lift demand annually by 3mt. Global palm oil production is around 80mt with Indonesia being the largest producer at 47mt.
Chickpea prices ease on grower selling, Faba beans firmer
Chickpea prices have lost around A$200 per tonne on pre-harvest values due to heavy grower selling as exporters rush to fill vessels and ship product ahead of the next sub-continent harvest and the possible restoration of import tariffs. Currently chickpeas are trading A$860 per tonne port or around A$800 per tonne delivered up-country packers.
The poor harvest in South Australia and Victoria has sent faba bean traders north looking for supply. This has seen faba bean prices improve by around A$40 per tonne this week to A$540 per tonne delivered Brisbane.
This table shows grower trade bids for grain in major Australian grain markets. Source: Clear Grain Exchange
Agronomy Update
View from the field
“There have been significant changes to this month’s numbers with all failed crops grazed or cut for hay. You will also notice that the yield potential on some crops in the northwest and central west has declined due to pinched or lighter than expected cereal gain currently been harvested.
“The northwest harvest continues, with solid yields reported still, despite some challenges. There have been a few delays due to storms, but in general, the push is on to complete the harvest prior to further predicted rainfall.
“Reports of 2.8t per ha canola on dryland crops, would certainly put smiles on growers faces in the northwest.
“Windrowing of canola continues in the Central West and Southern Slopes, with yields reported from 1.6 to 2.5t per ha dryland. Wheat and barley crops are now been harvested across NSW with mixed results. A report of barley crops from the central west and slopes from 2-6t per ha dryland.” - Adam Little, State Technical Services Manager, New South Wales
“Yields across South Australia have been slightly better than expected. The Mid North is the major exception where many growers will be lucky to get seed back. A seed request has come in from the Elders Jamestown branch.
“On the Eyre Peninsula, western areas are cereal harvesting crops that are yielding 0.5t per ha, things improve a little in far western locations with yields rising to 1 to 1.5t per ha, and then as you move south through Cummins, yield potential moves back towards average. Harvest is only in the very early stages.
“On the Yorke Peninsula there are some strong harvest results for those who dodged the frosts, with canola yields approaching 2t per h and lentils 0 to 2.2t per ha.
“Across the Riverland-Mallee, crops that had good potential considering low in-crop rainfall on subsoil moisture from summer rains and good weed control were knocked about by the late frost. Canola is yielding 0 to 0.6t per ha. On the cereals there are lots of reshot crops with flowers and green shoots that we are currently working out the best harvesting method. We will probably need to windrow these and rake several rows together. These crops have the potential to yield somewhere between 0 to 2t per ha.
“Crops through the South East are approaching average thanks to late spring rains. They are not quite ready to harvest.” - Lyndon May, State Technical Services Manager, South Australia
CBH reports that harvest is well underway across WA with some interruptions due to rain last week across most port zones. In the Geraldton zone wheat receivals are expected to pick up this week with early reports of solid yields of 3.5 to 4t per ha. Last week receivals were focussed on canola and barley.
Kwinana North is the most advanced although deliveries are focussed on canola and barley. Some high screenings stacks have been designated.
Kwinana South is now seeing canola roll in with deliveries to date focussed on barley with growers halfway through barley harvest. Oats, canola are wheat are starting to trickle in across eastern sites.
Esperance zone has seen barley and canola deliveries the focus with programs now wrapping up and moving onto wheat. High screenings wheat stacks are likely to be opened.
Albany zone has seen mostly canola and barley with some wheat deliveries which is early for this zone.
Some late spring rain seems to have rescued the WA crop that was always behind average due to late emergence and low in crop rainfall in most areas. Early harvest results suggest slightly better than average and better than expected yields with some quality issues such as high screenings being reflective of the season and the hot/dry early spring period.
Sources: Grains Industry of WA and CBH harvest reports.
“Field peas are coming in at 0.5 to 3t per ha, but highly variable due to frost. Barley is 2.5 to 4t per ha, which excellent quality, plenty achieving malt.
“Canola is going 1 to 3.5t per ha, again highly variable, oil quality ranges from low to okay. Wheat has not yet been harvested.
“It seems growers are selling peas, canola and barley straight off the header.” - Jono Fenwick, Senior Agronomist, Echuca
“Southern Mallee crops are in line with modest expectations, with lentils 0.5t per ha, barley 1.5 to 2.5t per ha and wheat most likely around the same with wheat harvest only just starting. All below average, probably cost back to grower.
“The Wimmera is mixed with the best crops in southern and western Wimmera with yield expectations 2.5t to ha for beans, 2.5t per ha for canola, 4 to 5t per ha for barley and 3 to 4t per ha for wheat.
“Patches around Horsham in the central Wimmera are poor with lower yield expectations. In some cases, zero, in other nearby paddocks average yields. With some hot weather over the weekend harvest should get into full swing next week. Storm lotto areas south of Warracknabeal are still inline for above average yields.” - Mick Preston, Rural Products Sales Manager, Horsham
“Crops are under irrigation through the south-west.
“Wheat crops range from Z83 (Early dough) – Z87 (Hard dough) with growers anticipating their harvest to commence the last week of November, first week of December. Anticipate the speed of dry down to hasten as temperature and solar radiation naturally increase as we progress further into Spring and head toward Summer. Yields are looking positive with varying degrees of frost experienced. On average these crops have received two in-field irrigations with some receiving a third depending on the time of sowing and conditions at planting.
“Barley which is currently at Z87 (Hard dough)- Z91 (Grain hard, difficult to divide) will be the first to harvest of the irrigated crops. Crop yields will be highly dependent on the fertiliser supply provided to the crop with these crops typically receiving one to two in-field irrigations. Grain should meet malt specification.
“Seed oat crops around the region are looking good with high yields anticipated. These crops range from Z77 (Late milk) – Z83 (Early dough). Stem rust has emerged in the area post the warm weather (18-30 degrees) and humid conditions promoted by in-field irrigations.” - Meg Brown, Agronomist, Griffith
“Water use efficiency and sowing time has been key to growing good crops this year with those that sowed on time and kept summer weeds under control reaping the rewards. Those who grazed off self-sown crops on summer rains have paid for it in winter crops yields. With the difference being yields of 0.5t per ha to 2t per ha on canola.
“Those that conserved moisture and sowed on time have had decent results on canola of 2 to 2.6t per ha while those who had to work fields after some flooding and were late to plant have been penalised with yields in the 1.5 to 1.8t per ha range.
“Time of sowing hasn’t been as critical on wheat as late sown crops benefited from 50mm just after emergence with crops expected to yield 3 to 4t per ha across the board.
“Barley crops that were sown early on paddocks that were well looked after achieved yields of 4 to 5t per ha with quality good, mostly going Malt or BAR1.
“Pulses looked ordinary and will yield below average at best.
“Some good results on hay with vetch hay crops yielding 3 to 6t per ha and oaten hay 6 to 10t per ha.” - Anton Mannes, Senior Agronomist, Bendigo
“Canola yields have been affected by frosts with yields better on the slopes but poor in lower areas of paddocks. Average should be around 1 to 1.2t per ha about half average.
“Barley has yielded much better with frosts mostly impacting lighter crops which are going around 3t per ha and had a few quality issues such as high screenings and low-test weights. As harvest advanced and moved into the heavier crops, frost damage was less apparent, yields rose to average 4t per ha with the odd crop 5 to 6t per ha and quality improved with most loads going Malt or BAR1.
“Expectations for wheat crops are for yields greater than 3t per ha and protein should be reasonable with expectations for lots of H2. Wheat harvest should commence next week, pending storms forecast. Pulses look to have been frosted with some lupins, field peas and faba beans harvested but no indications of yields.” - Terry Edis, Branch Manager, Ariah Park
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