Wheat export pace solid, but barley lagging

Wheat export pace solid, but barley lagging

WA disappointed, compared to pre-harvest expectations, with wheat, barley and canola production coming in at 5.5 million tonnes, 3.5 million tonnes and 1.1 million tonnes respectively.

WA disappointed, compared to pre-harvest expectations, with wheat, barley and canola production coming in at 5.5 million tonnes, 3.5 million tonnes and 1.1 million tonnes respectively.

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WA disappointed, compared to pre-harvest expectations, with wheat, barley and canola production coming in at 5.5 million tonnes, 3.5 million tonnes and 1.1 million tonnes respectively.

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There are no more soothing or relaxing sounds than the rumblings of distant thunder followed by the pitter patter of rain on a corrugated tin roof; an experience revived for those fortunate enough to receive rain in the last week.

While there is still the prospect of more falls this week, the rainfall recordings to date have been a touch disappointing compared to the forecasts prior to the change moving through the eastern states late last week and over the weekend.

The drought has definitely not broken, but it is a start and all falls were gratefully received in the regions lucky enough to make the scorecard.

People are now looking for some follow-up falls in the next few weeks to confirm a change to the record dry pattern that has haunted and stymied agricultural production on the east coast since 2016.

It is too late to plant cotton, but forage sorghum, grain sorghum and mung beans are all options available to those growers in Queensland and northern NSW who received enough rain to join up with their existing subsoil moisture, or those who can't resist the temptation to get back in the game even though the rainfall was less than ideal.

At this stage, it is hard to see a substantial change to the summer crop production numbers and the eastern state consumer will continue to rely on grain movements from Victoria, South Australia and Western Australia to satisfy the majority of their requirements through to late 2020.

The headers are now back in the shed in all regions except the western districts of Victoria, and the final winter crop production numbers certainly reveal how deep the drought cut in 2019.

WA disappointed, compared to pre-harvest expectations, with wheat, barley and canola production coming in at 5.5 million tonnes, 3.5 million tonnes and 1.1 million tonnes respectively.

With a late break in many regions followed by poor winter rainfall, the crops entered spring well behind the eight ball.

Below average spring precipitation, meant the crops never got close to average potential in most districts.

While production in SA was marginally better than in 2018, it was still well below average.

Wheat, barley and canola production finished up at around 3.0 million tonnes, 1.7 million tonnes and 0.35 million tonnes respectively.

Harvest receivals into the Viterra system were extremely disappointing, and appear to be a reflection of increased storage competition and the immediate movement of grain direct into domestic demand points in the eastern states.

The Victorian harvest is almost complete, and it is the only state where yields in 2019 have significantly surpassed the drought-ravaged 2018 numbers.

Final wheat production is expected to be 3.5 million tonnes, barley production is forecast to finish at 2.4 million tonnes and canola production at 0.55 million tonnes.

In a big year, NSW can challenge WA as the biggest grain-producing state of Australia. Not in 2019.

While the south of the state generally had better crops than in 2018, other parts were much worse.

The area of wheat, barley and canola that was cut for hay was enormous.

Add the proliferation of on-farm storages in recent years, and the state production guessing game gets increasingly difficult with each passing year.

That said, it seems that total wheat production finished up slightly less than in 2018 at 1.6 million tonnes.

Barley production was also down year-on-year at 0.6 million tonnes, but canola bucked the trend with output a little higher at 0.25 million tonnes.

That leaves the "Sunshine State" of Queensland where wheat production increased year-on-year to 0.6 million tonnes, thanks to a better than average season in Central Queensland.

However, barley production remained static at 0.1 million tonnes.

The washup is an Australian wheat crop of just 14.2 million tonnes, the lowest since 2007 and the third-lowest in the last 25 years.

Barley ended up at 8.3 million tonnes and canola at 2.25 million tonnes.

That means that national production of wheat, barley and canola was collectively less than 25 million tonnes, again the lowest since 2007 when the collective total was 21 million tonnes.

So, what do we have to export?

On the canola front, the exportable surplus is 1.4 million tonnes based on domestic demand of 0.85 million tonnes and no building or drawdown of stocks throughout the season.

On the barley front, I am calling the carry-in 1 million tonnes, with a 0.2 million tonnes increase in stocks leading to a carry-out 1.2 million tonnes.

If we call domestic demand for malting barley 1.1 million tonnes and feed barley 4.0 million tonnes, that leaves an exportable surplus of 3.0 million tonnes.

Quite a modest target in light of historic demand from China.

However, sales into China have been slower than expected so far this season, and some traditional Japanese demand has been going to Canadian exporters.

Other Asian consumers have stepped up, but the current pace is well behind that needed meet a 3.0 million tonnes export target.

From a wheat perspective, the biggest moving target is the October carry-in figure.

I have seen some estimates as high as 3.5 million tonnes and some as low as 2.5 million tonnes.

Let's call it 3.0 million tonnes.

If we call imports 0.3 million tonnes, then that gives us a total wheat supply of 17.5 million tonnes.

Domestic demand is always interesting and tends to be underestimated in my book, but it should be around 8.5 million tonnes, assuming we get rain and the cattle on feed numbers drop in the second half of the marketing year.

If we assume that stocks are drawn down by 1 million tonnes across the season, that leaves a carry-out of 2 million tonnes and an exportable surplus of 7 million tonnes.

Looking at actual November exports and the December and January shipping stem we will have exported 2.6 million tonnes by the end of January.

That compares to only 2 million tonnes for the same period last season.

The stem for February is building, and Asian export enquiry for Australian wheat continues to surface.

If export sales continue at the current pace, the wheat cupboard will be quite bare by the end of May.

While the season was extremely disappointing from a production viewpoint, the pace of wheat exports and continued enquiry from Asian consumers is supportive of current domestic prices, despite the premium to global values.

Unfortunately, the same can't be said for barley exports but the domestic balance sheet is quite tight and could handle a bigger carry-out number without being bearish, especially at the current price spread to wheat.

  • Details: Grain Brokers Australia, 1300 946 544.
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