Australian Crop Update – Week 26, 2024

The Australian cash markets were steady to softer last week as they responded to more rain and offshore weakness. Old crop premiums for the higher grades are starting to come under pressure amid limited demand and overseas competition but on the other hand, supply is increasingly limited. In general, market participation is very limited with the nearby shorts sufficiently covered after the increased selling through June, while farmer selling has slowed.
 
The trade was bidding much lower over the last 10 days as buyers reacted to stiff global export competition into Asian destinations as the new crop northern hemisphere harvest pressure is felt. It’s difficult to see this changing in the near term with the northern hemisphere harvest set to continue through July and into August which will keep the pressure on the c&f markets. Export sales are hard to make at the widening price relativities.
 
Australia’s markets have ignored a lot of the decline in US wheat futures in June which has seen the Australian basis rally by USD$22 to 30 per metric tonne (/MT). Australian farmers are slow sellers of old and new crop, and this is unlikely to change until we get to spring. At the same time, exporters are finding it difficult to connect with overseas buyers with the widening spreads between Australia wheat and Black Sea wheat landed into Asia and other destinations. History shows the spread between Aussie wheat and Black Sea wheat must narrow to find demand, but it may not happen until we get closer to the new crop positions.

A quieter week for bulk shipping but rates appear to be holding steady for now, largely underpinned by tight tonnage supply. Panamax continued to struggle with the Atlantic proving the more positive basin on the back of some fresh enquiry. Supra/Ultras in Asia are still trading around 16-18kpd for Pac/Aussie rounds. The handysize market demand/supply remains balanced and rates have overall held their levels.
 
On the Aussie coast, we saw a few prompt ships cleared early in the week which in turn helped stabilised the rates.
 
On containers, Singapore port has experienced severe congestion over the past few weeks and this is leading to substantial vessel delays for ocean carriers and a sharp increase in container rates for shippers who are already dealing with the difficulties created by cancellations and diversions away from the Red Sea.

The Shanghai Containerized Freight Index (SCFI), which is considered a benchmark for container freight, rose from USD 2,305/TEU on May 10 to USD 3,475 on June 21, an increase of 50%.

Reports indicate that nearly half a million containers are currently stuck at the port of Singapore. According to Drewry’s Ports and Terminals Insight, in the first five months of the year, throughput at the port of Singapore grew 8% year-on-year but is not enough on its own to challenge existing handling capacity. However, the rerouting of container vessel services away from the Red Sea in response to the Houthi attacks resulted in a 22% increase in average parcel sizes in the period between January and May and this has created efficiency bottlenecks which are, according to some reports, spreading to other Asian hubs.

To address the bottlenecks, the Maritime and Port Authority of Singapore (MPA) has reopened the previously shuttered Keppel Terminal. This move has increased weekly throughput from 770,000 TEUs to 820,000 TEUs, offering some relief to the port terminals and yards. In addition, to alleviate the severe congestion, Singapore also plans to expedite the opening of new berths. Terminal operator PSA will inaugurate three new berths later this year to boost overall port handling capacity and it is hoped things start to ease in Q4 of 2024. However, none of this helps the issue of container lines not being able to call in the Red Sea. That issue seems set to continue without an end or solution in sight.

Last week was another week with limited activity for the shipping stem additions. There has been about 250 thousand metric tonne (KMT) of wheat added to the stem in the past week, 60KMT of barley and 30KMT of canola. The wheat additions were split between WA and VIC with a 25KMT vessel added in SA. May wheat exports are expected to be down on April’s 1.86 milliom metric tonne (MMT). Australia’s grain exports are expected to remain slow until new crop supplies come on stream.