SA Harvest & Market Update – 11/12/24

Local wheat cash prices have responded to the east coast rain downgrades with Port Adelaide pricing jumping up to $10 – $15/mt during the past 5 days, before relaxing later last week. Prices in the Port Lincoln Port zone were not as well supported, increasing only a couple of dollars whilst Lucky Bay / Wallaroo T PORTS pricing had little movement. The Port Adelaide price move is basis domestic buyers and also driven by higher Victorian grain bids, where we have seen a pick up for milling wheat. Meanwhile limited buyer liquidity and lack of domestic buyers seems to be holding back Eyre Peninsula pricing. Trader appetite is fairly low and competition is lacking, with values remaining very cheap and price relativities actually declining over the last few weeks vs other states – The cheapest is getting cheaper..

Barley prices remain relatively flat as grower selling in the eastern states picks up, especially Southern NSW, where barley selling has been aggressive.

Wider market interest is drawn to the Eastern Sates where we have seen a  significant weather event, with Victoria and Southern NSW seeing some big rainfalls and crop downgrades. We have some reports of damage to standing crops, especially in the Mallee and Southern NSW. The market remains nervous on the quality ramifications for unharvested crops and there are also some logistical issues that have developed. In general this event slowed harvest and selling / deliveries. It is actually rallying all grades, even SFW wheat is higher in most areas week on week.

SA Harvest Quality to date

Despite rain interruptions over the past week the quality of the SA crops seems to be holding up with good amounts of hard wheat, which is unlike the majority of other export zones. The only other meaningful hard wheat production is in NSW / QLD, where we have a huge logistics gridlock in the North, with 85% focus on Chickpeas, rather than wheat exports. Significant milling demand across the state will also limit hard wheat exports out of Port Kembla. While rain in the South will affect the volume of hard wheat flowing to Victoria out of far Southern NSW.

The WA harvest is progressing very well, after a pretty clear week with more than 15 mmt of grain delivered to CBH to 2/12/24. Hard wheat deliveries remain less than 7% of all wheat delivered vs 30% last season, with year on year tonnages being down around 1.5 mmt. We have had some reports of falling number issues following recent rain events over the last few weeks but the wheat crop is now 80% plus harvested after a good 7 days harvest window, without any significant deviation from early quality spread.

Hard wheat export availability is certainly declining over the last few weeks, including the surprisingly softer crop in Victoria, very low WA hard / milling percentage and now East and West Coast weather issues / downgrades

Hard wheat demand

We have seen the usual Asian part cargo demand for hard wheat, which is being serviced from SA and NSW and seems adequate to soak up grower selling. We note new inquiry from African buyers this week, which is a demand we haven’t seen of late. African destinations soaked up significant SA cargo last season, with full cargoes of High spec APW – AH12 demand in play there. The re-emergence of this demand will be supportive of hard wheat values going forward.

Overall, the main hand break on higher protein/quality wheat has been Canadian / US high protein prices, which have remained quite cheap. Minneapolis futures have a significant and somewhat unusually large fund short position, which explains part of the aggressive stance of sellers out of our main competitors and makes high protein wheat relatively well priced vs standard wheat grades on the global scale.

Australian production has been upgraded, with ABARES coming in at 31.9 mmt for wheat during the week, which is more realistic and in line with trade expectation vs previous estimates. Interestingly barley has been dropped in the same report, remaining sub 12 mmt and slightly below Flexi Grain expectations.

Global Markets

As expected by Flexi Grain for some time, this week Russia announced wheat export quotas from 15th February to the 30th of June 2025. The export quota will be 11 million tonnes down from 29 million tonnes for the same period this year. This was not big news for the trade and the market reaction was somewhat subdued due to this. I think we will be forced to see the market reaction when the quota is implemented and the actual tightness of supply needs to be digested by the market.

Uncertainty still remains around the condition of the Russian winter crop. Late last week Russian crop analysts reported more than 37% of Russian winter crops are in poor condition (a record high), whilst 31% of crops were rated in good condition (lowest rating in 23 years). The Russian Deputy Prime Minister mentioned that some of the winter crop will need to be replaced with spring crops.Trade and analysts early estimates of the new Russian winter wheat crop are sitting around 80 mmt, with the weather market now lacking news until crop dormancy breaks in Spring.

Harvest of the South American winter crop is progressing with estimates of the Argentinian wheat crop increasing and BAGE exchange expecting 18.6 mmt (vs USDA at 17.5 mmt). Whilst the harvest moves on, planting of the South American summer Corn and Soybean crops has commenced under very good conditions setting up what could be another large crop year across both Brazil and Argentina. Currently corn is well priced vs feed wheat across most regions including Asia, where corn is displacing the majority of switchable feed business, in line with tighter year on year wheat availability.

Brazil and Argentina account for nearly 45% of global corn exports, producing more than 300 mmt last season.

Grower Bids Expressed in FOB Equivalent Values ($US/mt) as at 11/12/24

*SA Ports have a $US3-5/mt freight disadvantage to WA

** NSW/Vic Ports have a $US5-8/mt freight disadvantage to WA

Despite the east coast weather developments, SA Hard wheat pricing remains cheap compared to the rest of Australia because of:

1. Lack of export programs, leading to a lack of competition and few active bidders;
2. Liquidity and Completion risks – traders do not want to get caught short with partly filled export cargoes and being squeezed to fill;
3. Trading smaller volumes which offer little additional return for the extra effort compared to NSW and WA where large volumes of grain are available to trade.

What changes this?

While we are seeing the underlying situation move towards relative support for hard wheat and SA quality profile, there is no guarantee that the situation changes from a grower bid perspective. With the lack of open book, completion / liquidity issues and some genuine apathy, it is hard to see it change today.

There of course remains the chance that someone takes the trade on and gets short some cargo and the grower is able to squeeze them on price to cover, but to us the trade are being careful to avoid this and the lack of competition adding to this calmness.

Flexi Grain’s Collaborative Export Program

To alleviate the SA liquidity issues mentioned, Flexi Grain has committed to building an export program for Hard Wheat and Feed Barley ex Lucky Bay and Wallaroo with export slots booked for March. 

Wheat Export Program

Over the past week Flexi Grain has been receiving increased African and Asian buyer enquiry for hard wheat. This demand is not unusual however the timing is. News of the recent rainfall in Eastern Australia, and resultant concerns of a smaller Australian hard wheat crop, seems to have encouraged buyers to secure cargo and sellers to look at covering forward sales out of different states.

The high quality profile of the SA crop will permit blending opportunities for lower grades of wheat (AUH2, APW1, ASW1 and AGP1) so these grades will be accepted into the program. 

Barley Export Program

Chinese demand for barley remains very strong with the current spread to corn in China making Australian barley very attractive to the Chinese consumer for feeding, which is in addition to FAQ and malt demand which makes up the majority of Australian imports. Last year (2023-24) China imported a staggering 16 mmt of barley keeping the global barley sheet very tight and drawing down stocks in all exporters. Forecasts for China imports were overly conservative until recently, which was driven by rumours of import limitations. The underlying demand we are seeing remains stronger than market numbers and vs the USDA 10 mmt import estimates, noting that USDA missed by 4-5 mmt on their estimates last season. With global stocks and production issues in barley, we expect Chinese imports to be limited to 11 mmt this season, down 31 % + year on year and the market may still need some relative price action to reduce demand to match supply availability.

Flexi Grain is seeing significant buyer inquiry for FAQ and Malt, along with various feed quality demand. Recently NSW has seen significant container and bulk activity on Malt and FAQ grades, as the quality is excellent vs WA and SA options.

Tonnage Contracts for the Collaborative Export programs are now open* 

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