Victorian wheat is lowest priced in Australia

This year Western Australia, South Australia and Victoria will all export grain and should be trading at internationally competitive prices.

Given winter grain production was less in northeastern Australia, you would expect grain prices to increase as you move north up the east coast, which was the case late last year.

There were reports of barley shipments from WA to northeast Australia last year to help relieve some of the shortfall in the area.

Favourable rains in northeastern Australia more recently have created good summer crop prospects and we've seen the drought premiums eroded from prices on expectation of more grain available.

This explains price differences between grades of grain across port zones going up the east coast of Australia, but it's difficult to explain the price differences across exporting states of WA, SA and VIC.

Last week ASW1 wheat traded in the Kwinana zone of WA at A$403 a tonne FIS port which equates to approximately US$280/t Free on Board (FOB) equivalent ex WA port in US dollars a tonne.

ASW1 traded A$365/t Port Adelaide SA and A$340/t Portland VIC, or US$270/t FOB ex-Port Adelaide and US$255/t FOB ex-Portland equivalent.

That's a difference of US$25/t or A$38/t in Australian dollar terms between ASW1 wheat in WA and Victoria, of which bulk sea freight would account for US$5-8/t (A$8-12/t).

Why is Victorian ASW1 wheat trading at such significantly lower prices to WA and SA?

Victoria has produced a record crop this year and it needs to be exported. But it doesn't have to be exported at significantly lower prices than similar quality grain from other parts of Australia.

Victorian grain is needed by offshore buyers, Victorian domestic buyers, and likely by some domestic buyers north of Victoria as they juggle a smaller 23/24 winter crop and await summer crop supplies.

It was reported last week that the Philippines bought Australian feed wheat at the equivalent of US$255 FOB ex-Victoria or A$335/t track Portland-Geelong, which is close to the VIC ASW1 price.

Even with a wet harvest, it is unlikely that Victoria will have produced enough feed grain to meet domestic demand, and there should be no need to sell into export markets below other states.

Growers in Victoria, like all other states, have an opportunity to impact the price of their grain by offering it for sale rather than accepting published bids.

Feed wheat grades typically trade at ASW1 prices at some stage after harvest. To determine the value of ASW1 grade wheat, Victorian farmers should look at prices in other states.