Last year both wheat and canola prices rallied into mid-December, until large quantities of commodities came online, and likely those early shipping slots were covered. Once supply chains were full, bids reduced, until the conflict in the Ukraine escalated and caused prices to reach and exceed those mid-December highs.

This year we have a similar situation of a delayed harvest, quality declining and wheat (APW and above) and canola prices at, or around, the highs for the year. Protein spreads are increasing, with APW wheat currently trading at $75 over ASW1, $140 over SFW1 and $160 over FED1.

As the crop has started coming off, ORM asked the experts for their assessment on price outlook.

 

Nick Carracher, CEO and Commodity Advisor for Lachstock Consulting

Locally – We have a massive crop coming at us and we are dealing with a lot of lower quality grain. Two distinct price outlooks for wheat: APW and above, and ASW and below. We are awash with lower quality grain and our clients’ have been busy selling large quantities but holding onto quality, as the protein spread is likely to get even bigger than current levels. Fusarium is a big issue this year with no segregation for the affected grain and no export bid. This will impact the whole of NSW and QLD, with potential to impact Vic and SA. Piggeries took a lot of this grain last year, but there is no plan B for Fusarium affected grain. International freight costs are coming down, but that hasn’t been the bottle neck; getting the product to port has been the issue. Interior demurrage in WA is train driven, not boat driven.

 

Internationally – It is impossible to predict what will happen with prices in the midst of a war in the Ukraine. US Hard Red Winter wheat conditions are poor. It feels like we are ignoring gaps in grain flows.

Canola is at too big of a discount to global values, which indicates possible price upside. Russia export corridor is off, which is impacting canola pricing. There is a low oilseed area in the Ukraine, which suggests supply headwinds later. There is however a narrower window for pricing canola in Australia, as exporters are mostly done accumulating supply by the end of May.

The barley carry-in is mostly of lower quality; like wheat, there is more chance for Bar1 price to improve than the lower grades.

Recently South Australia has been the best paying market as their ports have been the easiest for exporters to execute grain shipments out of. However, currently there is a lot of grain in SA for the export path and grain probably flows the other way because the export capacity now is in NSW.

 

Jess Kirkpatrick, Grain Merchant, CHS Broadbent

What’s similar to last year? Above average national production and high prices against historical averages for growers to take advantage of. For the third year in a row, La Nina is causing challenging conditions near the end of the growing season on the East Coast, so there are a few unknowns as we head into harvest and beyond.

In general, it is thought that the flood damage will disproportionately impact individual growers and with the softer finish to the growing season combined with high cost of fertiliser reducing inputs, it is likely our wheat crop is going to be lower protein.

Exporters will be trying to maximise tonnage like last year, where 27mmt of wheat was shipped out of the country. Like quality, supply chain impacts are hard to predict now, however there could be damage to road and rail infrastructure from recent rainfall.

What’s different?

War lends itself to volatility across markets and commodities are not shielded from this. Russia invaded Ukraine in late February causing concerns about supply of grain and inputs to the globe. Many of the rises and falls in the market over the 10 months can be linked to the developments in this conflict and there will be continued uncertainty as the war continues. Simultaneously, stocks are rebuilding, particularly in Russia, and the question will be when this grain will find its way into export channels?

 

ORM Summary

Current protein and quality spreads are forecast to continue into harvest. Price premiums provide incentive for getting crops into the bin as soon as they are harvestable. Plan harvest to allow for the ongoing forecast wet. The cost of extra headers or in paddock logistics for grain movements may provide an excellent return on investment if avoiding quality downgrading or grain loss.

 

Ben Hogan, Agribusiness Consultant.

 

For more information contact us here admin@orm.com.au