Australian grain prices continued to strengthen last week and/or remain supported at the higher levels gained in previous weeks despite international wheat futures staying near contract lows.
Demand for Australian grain is robust currently with a sequence of factors seeing buyers wanting to secure safe, quality, and reliable supply from Australia.
Two months ago, demand for Australian grain had stalled with offshore buyers being patient given the northern hemisphere harvest had begun and there was ample supply of cheaper Russian wheat.
Since then, the Ukraine grain corridor ended followed by Russian bombings on Ukraine grain infrastructure dwindling prospects of their grain flowing through Europe to the rest of the world.
It also created uncertainty over the flow of grain out of Russia, and specifically the cost, given insurers are not keen to cover shipments leaving the area.
This saw offshore buyers start to step back in and cover more of their requirements from Australia.
Then China announced it would remove import restrictions on Australian barley which saw the Australian barley market increase to the tune of $40 a tonne in a day as buyers scrambled to participate.
It has been reported that China has purchased 600,000 tonnes of old crop Australian barley with private estimates putting this figure up to 1.2 to 1.5 million tonnes including new crop.
This has had a trickle-down effect to buyers of other commodities as suddenly, slots to export grain out of Australia were filling up with barley.
The response of offshore buyers of wheat and other commodities was to get more active in securing future supply from Australia.
At the same time the crops in major exporters Canada, Argentina, and Australia have all shrunk on dry conditions, and US crops have also deteriorated somewhat.
India is expected to be a wheat importer this year and container freight rates have come back to pre-COVID levels, which helps Australian exports of smaller crops such as oats and pulses.
As the pipeline of exports fills up and Australian crop prospects reduce, domestic users are also participating to secure supply.
It's a strong demand profile for Australian grains and is not reflected by the weakness seen in Chicago Board of Trade wheat futures.
US hard red winter wheat, similar to APW1 wheat, reportedly sold to South Korea for US$307/t Free-on-Board ex US last week.
If this was an Australian FOB price it would equate to about A$445/t FIS WA or A$430/t track Eastern Australia, which may provide a more useful price comparison for Australian growers.
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