WA set for near record crop

WA set for near record crop


Grains
ON TRACK: Australian crop estimates remain on track at 18-20mt, thanks to a near record crop in WA. But in other parts of the country there are a lot of areas where the winter crop has been abandoned.

ON TRACK: Australian crop estimates remain on track at 18-20mt, thanks to a near record crop in WA. But in other parts of the country there are a lot of areas where the winter crop has been abandoned.

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Australian crop estimates remain on track at 18-20mt, thanks to a near record crop in WA.

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Australia remains on track to have a reasonable crop (somewhere between 18 and 20 million tonnes), because of the season in Western Australia underpinning what could be a near record crop from the west.

Elsewhere in the country though, there are a lot of areas where the winter crop has been abandoned, and more of South Australia and Victoria coming under pressure as spring conditions unfold against tight soil moisture levels.

The Australian market is currently structured to ensure that wheat and barley can move from Western Australia and South Australia, into the consumptive markets on the Darling Downs and northern NSW. That pricing structure will remain in place until a potential summer crop returns local grain to northern markets.

While eastcoast prices are easily high enough to prevent exports, Western Australian prices are also looking high compared to prices from Black Sea exporters.   

That should be a bit of a warning for price levels in Australia. Prices in Western Australia should not be that much above export parity to ensure that enough grain gets diverted from export to domestic shipments.

When harvest commences, the gap between Western Australian prices and prices from other global exporters should move closer together.  That may give a general softening of prices across the Australian market, particularly if Australian growers are very active sellers off the header.

The risk for growers with grain this year is that if the summer crop develops strongly in northern NSW and Queensland, demand for grain from south and west may evaporate.  While that might just be while the northern sorghum crop is consumed, if that crop is large enough, it may limit the price recovery late in 2019, leaving harvest prices as the peak for the year.

If growers combat that risk by selling aggressively off the header, we could see a significant price gap between new season wheat and prices for the last of the old season wheat as we go into November and December.

Predicting harvest price levels in all parts of the Australian market is difficult, with the pace of farmer selling likely to put pressure on prices against any support, or weakness, that may come from Western Australian and South Australian prices needing to align with global export values.

If global prices increase over the rest of the year, which has been an expectation, it will underpin current prices in all parts of our market.    If the price increase fails to materialise, Australian new season prices are likely to fall from current levels.

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