Australian Crop Update – Week 24, 2024

Australian cash markets remained under pressure last week with increased grower selling after the recent rain in Western Australia (WA). Declines in global markets also weighed with CBOT wheat finishing the week down 2.3% and KC off 5.7%. There is no doubt that Australian market participants are becoming more comfortable with a reasonable production outlook for the 2024/25 crop. We have had a favourable start in New South Wales (NSW) and Queensland (QLD) and the late rains in WA, South Australia (SA) and Victoria (VIC) have settled nerves there.
 
SA’s PIRSA is pegging SA’s wheat crop at 4.8 million metric tonnes (MMT), barley at 2.1MMT and canola at 476 thousand metric tonnes (KMT). This numbers are slightly higher than ABARES
 
In the last week, old crop wheat grades were approximately USD5 per metric tonne (/MT) lower for FOB positions with new crop January also down USD6/MT. New crop bids however are hard to find with the trade a willing seller but there hasn’t been much farmer engagement. Demand has been an issue. Most of the Islamic world was heading into Eid holidays and the Asian buyer has covered his nearby requirements with cheaper Black Sea wheat were possible. The result is a wide bid / offer spread.

Looking forward, the Australian Bureau of Meteorology (BOM) issued its updated outlook for July to October on Friday, which showed the drier patterns for VIC and SA are expected to continue. For July, rainfall for much of Australia is likely to be typical for the season, however below average July rainfall is likely (60 to 70% chance) along the western slopes of the Great Dividing Range, and across much of southern Australia including Tasmania. The July to October forecast is drier than last week’s run.

Australian chickpea markets declined 1.5% last week with minimal trade reported in the domestic and international markets. Lentil trading was also muted. India’s Ministry of Agriculture released its third estimate for their domestic pulse crop. Total production this season is estimated at 24.5MMT which is down 6% from last year. This will no doubt prompt the importers to look at new crop supply from Australia and other origins to fill the short fall of domestic consumption.

PIRSA’s Lentil plantings are forecast at 332.4k ha which is 90k ha or 38% up on last year and 140k ha on 2022/23. They are forecasting a lentil crop of 511KMT up from 362KMT last year. PIRSA’s lentil forecasts are larger than ABARES, who also made significant increases. The increased lentil plantings are coming from other pulses but also barley. PIRSA made its assumptions and forecasts based on May 15, and flagged the dry start could jeopardise the current forecasts.

After the recent decline in Ocean Freight, there is a consensus that the dry bulk market has turned the corner off the back of more demand appearing in the Atlantic. The Panamaxes in the Atlantic were well supported in the major grain loading areas causing rates to spike, which in turn helped push the Pacific rates up with the option to ballast to EC South America more appealing. A similar story developed for the Supra/Ultra market whereby the Atlantic led the way, especially the USG market which saw a week-on-week gain of 25% on the index. We haven’t seen USG Supra market at these levels since back in March. The Pacific market was more subdued but talks of a floor being found after the recent decline grew louder as the week progressed.
 
The transit concerns through the Red Sea and subsequent disruptions and congestion in Singapore have translated into container capacity shortages as well as significantly increased freight rates to European, Middle East and African destinations. In recent weeks, many shippers have struggled to secure capacity at agreed contract rates, faced peak season surcharges and general disruption to their supply chains caused by port delays. Once again, the sensitivities of the market to imbalance have been exposed and consumers and Australian shippers are once again facing nearby contract execution challenges.
 
In terms of export stem, weekly wheat additions climbed to 400KMT last week with 140KMT of this in VIC. Nonetheless, additions have slowed for the Jul/Sep quarter. There was 55KMT of canola added to the stem in WA.