SA Harvest & Market Update – 14/11/24

Recent softening of prices locally, along with the sharp USD strength and AUD relative softness has seen prices get to a level that triggered some covering. Importantly, we have seen engagement from Chinese demand for Australian wheat and lower grade wheat in general, which has been notably absent from the market over the last 6 months or so. We also note good demand for barley, with significant volumes trading over the last 4-5 weeks and continuing demand, which Australia and especially WA and SA is in the box seat to price today.

Across Southern QLD and Northern NSW, Chickpeas and Faba beans are being actively harvested and sold as traders attempt to load and dispatch vessels to India prior to the end of the tariff-free trading window that closes in March 2025. Amongst this activity local growers are generally warehousing their wheat and barley. A smaller Faba bean crop in SA has focussed export demand for Faba beans to Northern NSW and Southern QLD. 

With large volumes of grain being harvested across Northern NSW, freight rates are firming and the availability of trucks is limiting grain movement. The shipping stem is seeing some delays and incoming wet weather will threaten to throw some more havoc into this export program.

Harvest of the NSW wheat crop is ramping up with reports suggesting there is a very good spread of quality, from ASW – APH through the Northern part of the state.

Local shorts for cereal grains have been largely covered North of Dubbo, but Southern NSW homes are still waiting for some proper harvest activity to get their cover. In general terms, the grower is well covered for cashflow in the North by Chickpeas and will be much better covered in the South by Canola, which they are getting into harvest for now.

Many in the trade are suggesting that the NSW grower will continue to be a slower wheat and barley seller, but we still think it is likely that a shot of harvest / selling pressure is inevitable in the next 4-6 weeks in NSW.

Harvest of the WA crop is progressing quickly with CBH (WA) receiving more than 1.5 mmt of grain last week. Of the 1.08 mmt of wheat already delivered to CBH only 5% is hard wheat vs 29% for the same time last year. The predominant grade is the lowly AWWT, which is essentially a low grade ASW / high grade feed type. The lack of Hard and especially Hard 1 wheat in WA is notable year on year. This dynamic bodes well for the expected higher protein harvest in SA, as it calculates well vs Canadian High protein production and loses its most fierce local competitor vs last year.

Harvest of the QLD and Northern NSW barley crop is nearly completed with a very high malt selection rate being reported. The barley harvest is gathering pace in Southern NSW, with a large percentage of early crops making Malt and BAR1 grades. Low Malt selection rates are being reported in WA and SA to date. Of the 1.56 mmt of barley already delivered to CBH only 11% is malt. 

At current Malt selection rates, more than 70% of the Australian Malt crop is likely to be in Eastern Australia and with the SA Malt selection expected to be low, we may see some domestic draw from Victoria to fill local demand.

In general SA domestic markets are calculating well out of Western Victoria, which indicates significant interstate imports will occur over this season.

In general, we think there is still some harvest pressure / grower selling to come in NSW and Victoria, along with WA and SA. So some price pressure at times is to be expected.

Estimated Values this week

Local values have generally held firm for the past 7 days supported by a weakening AUD dollar in the wake of the US election result. At a FOB (Free on Board) level, SA grain values remain the cheapest in Australia today, which is driven by some grower harvest and selling pressure colliding with the lack of a local export program. As we have said before, there was no reason for the trade to put SA sales on with local pricing over the last 6 months. There is little reason long term why SA wheat or barley should stay cheap relative to other Australian ports, aside from certain circumstances where grain per grade can be stranded in the wrong location and making cargo size can become an issue. We have previously communicated on this subject.

Wheat Values

Initial quality reports are suggesting the WA wheat crop will be low protein, and predominantly ASW / below. NSW exportable surplus looks like being geared towards ASW, with some APW and hard and the very consistent APH2 demand that always goes.

If the current protein trend continues the SA crop will be strongly positioned to supply high protein grades (H1 & H2). We are working on the basis that the SA crop will be heavily skewed to higher protein vs average.

Hard 1 and 2 grades lend themselves to smaller cargo size and top offs, which may suit the smaller crop and possible liquidity issues in SA this season.

Barley Values

Low malt selection rates across SA to date are likely to drive imports of Malt from Western Victoria to fill domestic market requirements. An absence of significant bulk volumes of Malt grades in SA Ports to date is limiting export opportunities.

Malt spreads remain +$5-10 in SA. Be wary of warehousing Malt in ports. 

On the Yorke Peninsula and Mid North, we would avoid putting Malt in Wallaroo and Giles at the moment until the size of the local Malt crop is known and shipments are put on – as it may be stranded in an illiquid environment where it can only be priced as feed, or incur significant costs to outturn from port. Get it into the Adelaide drawing ark or keep it in an upcountry site for the time being where it can be more efficiently executed to domestic markets if necessary.

Grower Bids Expressed in FOB Equivalent Values ($US/mt) as at 14/11/24

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

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

Flexi Grain – Tonnage Contract Strategy considerations

Avoid selling under Harvest Pressure.

1. Hold high protein wheat. SA H1 & H2 values are currently the cheapest in Australia, in a season where supply of H1 & H2 from WA and NSW will most likely be reduced year on year. SA wheat is competitively priced into export markets today. A tight global balance sheet, the possibility of Russia curbing export pace in Q1/Q2 2025 and availability of shipping capacity puts SA wheat in a prime position to capitalise on any market rally post harvest;

2. Hold feed barley. SA values remain cheap into feed markets and China ex SA today. The barley balance sheet is tighter year on year in Australia and all China supply countries. Strong early WA export pace of BAR1 is likely to swing into other crops as local BAR1 stocks are depleted, supporting export Barley prices in other states;

3. On the Yorke Peninsula and North Mid, keep Malt out of Wallaroo and Port Giles and be careful of the less liquid ports. Get malt into the Adelaide drawing ark or keep it in an upcountry site for the time being where it can be more efficiently executed to domestic markets if necessary.

4. With pending harvest pressure in Southern NSW and current high decile pricing, Flexi Grain would be a seller of Lentils and Canola today. 

Flexi Grain Harvest Tonnage Contracts Now Open – Access Harvest Cash Flow (60% Harvest Advance payable within 7 days of grain transfer) and get exposure to Post Harvest Markets both Export and Domestic.