WA will still need to look to export grain markets

WA will still need to look to export grain markets


WA will still need to be a player on the international wheat market this year.

WA will still need to be a player on the international wheat market this year.

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There will be grain heading from Western Australia to the east coast, but given forecast production, exports will still be critical.

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MUCH has been made of the red-hot demand for grain in Australia’s north-east, which has seen a steady stream of grain ships head from Western Australia and South Australia into the Port of Brisbane.

However, a leading grain supply and demand analyst said the size of the Western Australian crop this year meant the majority of grain out of the west will still head overseas.

“There will be demand from the east, for sure, but equally WA prices are going to have to come back to be more competitive internationally,” said Malcolm Bartholomaeus, Bartholomaeus Consulting.

Mr Bartholomaeus said he could see as much as another million tonnes of Western Australian grain heading to the east coast following the 2018-19 harvest, but added with agencies, such as Intl FC Stone, have WA wheat production alone at 9.3 million tonnes, there would still be a lot of grain that needs to be exported.

“It will be a decent slug of grain heading east, perhaps around 15 per cent of production, but it is not going to account for all the grain and WA’s prices are still much higher than the world market due to the east coast demand.”

He said recent rain had locked in WA production prospects after a dry September.

“Many of the grain producing regions in WA had a reasonable rain in early October, which will be extremely beneficial in the southern Albany and Esperance port zones where the crops were struggling early in the piece.”

He said he would be surprised if the Intl FC Stone number of 9.3m tonnes of wheat came to pass.

“That is similar to the figures we were hearing at the end of August and with virtually no rain in September I can’t see that there hasn’t been some loss of yield potential.”

However, he said the recent rain would lock in some yields.

Mr Bartholomaeus’s thoughts were backed up by eastern Wheatbelt grower Clint Della Bosca.

Malcolm Bartholomaeus believes WA is reasonably well set up for production following timely early October rain.

Malcolm Bartholomaeus believes WA is reasonably well set up for production following timely early October rain.

“We had an excellent winter but then I think we lost 25 per cent of our yield potential in the dry September,” Mr Della Bosca, based at Southern Cross, said.

“The rain since was handy and we are on track for reasonable yields if everything goes to plan, but we did definitely lose of that really high end yield potential with the September dry.”

Nick Carracher, Intl FC Stone risk management consultant, said the Aussie industry as a whole was looking with how much wheat WA would export.

 “The biggest issue is now not the production, which shouldn’t vary too much from here on, more the exports and how much wheat will we export,” Mr Carracher said.

“Obviously the market is pricing in the drought premium so every tonne that can will go to that domestic market, but there will still be an exportable surplus, so we’re watching what happens there.”

Peter McMeekin, consultant with Grain Brokers Australia, said he was still trying to get an accurate feel for WA production.

“Conditions vary from region to region and the impact of frost yet to be truly identified,” Mr McMeekin said.

An extremely dry September and several severe frosts early in the month, had put downward pressure on potential record-breaking winter crop production estimates,” he said.

However, he said recent rain would assist crops that were starting to struggle.

“Although patchy in some districts, the falls were very welcome and will certainly help to consolidate grain production.”

Trevor Syme, a grower at Bolgart in the western central Wheatbelt, said there had been a very wet winter followed by a dry September.

Some agencies have WA wheat production estimated as high as 9.3 million tonnes this season.

Some agencies have WA wheat production estimated as high as 9.3 million tonnes this season.

“We had 400mm for winter alone – that is around our average annual rainfall, but then it got very dry,” Mr Syme said.

“This last rain has helped a lot.”

Mr Bartholomaeus said he felt there was further downward pressure on WA grain prices.

“I think they have to pull back further towards international values, there is still a big gap between WA and international prices, with WA prices being higher.

“Once grain needs to be exported we will have to see the price come back for it to be competitive on the world market.”

He said the market would also be watching what is happening in other key grain exporting nations, such as Russia.

“Australian grain is overpriced against US futures and they are overpriced over Russian grain, so there will need to be an adjustment, either we come down or Russian prices come up.

Mr Bartholomaeus said Russian wheat prices had been climbing over the past fortnight, while Aussie values have come off slightly from the highs of the start of the month.

He warned of the potential for a sharp correction in prices if there was not a gradual easing and there was no further support for Russian prices.

“It all comes back to international competitiveness,” he said.

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