Australian Crop Update – Week 12, 2024

News surfaced in the Australian market last week that Chinese wheat importers have cancelled or postponed about 1 million metric tonne (MMT) of Australian wheat purchases. In discussions, rolling rather than cancellation has been the preferred route which sets up an interesting dynamic towards the end of the year. News of the Australian wheat delays or cancellations came after a reported cancellation of more than 0.5MMT of U.S. wheat exports last week to China. As a result, buyers pulled back their bids by USD20 per metric tonne (/MT) to the farmer but, in reality, Australian values are still some way above those needed to pick up the export pace. There has already been around 1.7MMT of wheat shipped to China from Oct-Jan for the 2023/24 season.
 
The cancellations have freed up shipping slots allowing fresh sales to be made in the nearby positions.
 
There were reports of fresh export sales through the week at significantly cheaper values than are currently being quoted by IGC. However, the sense we have is sales were limited. Domestic consumers remain well covered in. Trade remains very thin as growers finish their fieldwork ahead of the main planting window opening.

The shipping market appears to be settling at its new equilibrium after the recent fireworks. Hire rates on the Panamax have softened a touch over the past week but healthy demand levels remain, which is a good sign that the market won't collapse going forward.

We think that generally improved supply levels will make it hard for the Panamax market in the nearby to support the >20k levels priced by FFAs last week. Although, the well documented demand disruptions that are reducing ton/miles available to the market will keep the market well supported until the middle of the year. The general consensus is the market should hold within its current range until mid year and then the predictions start to differ depending on who you speak with. 

It’s been a lean week for shipping stem additions to Australian Ports. There were 440 thousand metric tonne (KMT) of wheat added to the shipping stem in the past week with 165KMT of this in South Australia (SA) and 80KMT WA with the remaining 50KMT in Victoria (VIC).

There was 85KMT of barley added to the stem in the past week, all in WA.

The question stemming from the past couple of weeks is how the Chinese wheat postponements/cancellations will impact the 2023/24 export program. The expected size of the cancellations as opposed to postponements has most likely been overstated. It is estimated that some small cancellations have occurred, however most adjustments were shipment deferrals potentially into later positions.