Australian dry, Ukraine war key factors for grain markets

It means early estimates for Aussie grain production for the 2023-24 are well back year on year, but a deeper look at the data reveals projected production will still be around long term averages.

The good subsoil moisture levels have analysts saying that a devastatingly dry season would be required for production to dip to the drought impacted levels of the 2018-19 or 2019-20 seasons.

But while local climate will play a big role in determining pricing trends analyst say that, like everything over the past year, the events in Ukraine will be the focus for the industry.

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Rabobank's grains and oilseeds analyst Dennis Voznesenski said how the Ukrainian conflict impacted grain production and exports in the fertile Black Sea region would be critical in setting the agenda for the grain market this year.

"The world will be watching Ukraine closely given both Russia and Ukraine are such vital grain exporters," he said at the Wimmera Machinery Field Days earlier in the month.

"While Rabobank has a view that long-term world grains and oilseeds prices will be down year on year, albeit from high levels, this is contingent on no further disruption in Ukraine."

"We have seen the impact of uncertainty about issues such as the renewal of the Black Sea grain corridor and how that can send prices up, so the market is very sensitive to any potential disruption."

He said it was likely that even if prices did trend down during the year there were probably going to be windows of opportunity for Australian growers to lock in higher prices with short-term spikes due to issues in Ukraine.

Andrew Whitelaw, analyst with Episode 3, also nominated Ukraine as the key to grain markets this year.

"The two countries contribute 30 per cent of the world's wheat exports and 20pc of the canola exports, they are clearly very important and a lot is riding on whether Russia allows the export corridor to remain open," he said at the Australian Summer Grains Conference on the Gold Coast last week.

Nick Orssich, StoneX Ag vice-president Asia-Pacific, said there would be ample opportunities to sell Australian grain.

"Even after three big years and significant carry-over we feel there will be good demand for Australian grain, both with traditional customers and those who have looked further afield due to the disruptions in Russia and Ukraine," he said.

The potentially less favourable weather locally could see a smaller export program.

"We don't see it being a horror drought as yet given the subsoil moisture but after three big production years it is likely production is likely to come down meaning less grain exported."

In terms of production he said areas that received heavy rain could probably manage average yields with below average rainfall this year.

"If it is only a little bit drier than average then you would expect the subsoil moisture would compensate, although there are limits to that, if it came in markedly hotter and drier in the spring yields would suffer."

"Western Australia, with its lighter soils that don't store as much moisture, would be somewhere that will require in-crop rainfall to achieve average yields."