Article provided by: Michael Jones, Grain Focus, Young

Wheat markets have maintained a sideways trend since recovering from the slump in July/August. Harvest hasn’t put pressure on the wheat market yet, but it is thought that growers are holding onto large tonnages of the crop, which is preventing any selling pressure at this stage. Canola and pulses (chickpeas/faba beans) are in demand from exporters and providing more attractive prices than wheat, so that is what growers are currently selling to generate cashflow. East coast ports are currently loading bulk vessels of canola and chickpeas, meaning that the wheat export program will not get going until late in the year or in the first months of next year.

Overseas wheat markets have remained flat with importing countries still finding plenty of sellers when they are in the market. With interest rates high and a flat market, importers are not buying any more than they need each month. Russia has maintained the strong export pace of wheat that it has had since harvest. The market is anticipating that their supply could run low in the coming months, which would see their prices rise and that would ultimately lift the entire market. Like many growers around the globe, Russian farmers are saying that there is very little or no profit in selling at the current prices, but they continue to sell anyway. One reason is that Russian interest rates are currently at 21% p.a, so it is seen as a better option to sell and deposit the money or pay off debt rather than wait and hope for higher prices.

APW1 multigrade wheat bids for the 2024/25 season were sitting at $339/mt Port Kembla at the time of writing. Looking at the past 5-year price range (which is more reflective of our current cost structure than a 10 year range), this is at a Decile 2.5.

Upside potential

Australia is waiting/hoping that Russian wheat export stocks that are closest to their ports will dwindle in the coming months. Russia is the cheapest seller in the market and any lift to their prices would boost the market. The Russian government is putting pressure on exporters not to drop their selling prices below a certain level, plus they have been increasing the export tariff, but neither have seemed to have slowed the export flow or lifted prices.
A weaker A$ makes our exports more competitive. At current market levels, a 1c move in the A$ translates to a $4.70/mt move in our wheat price.
The domestic feed grain market is robust with feedlots at full capacity and good returns for graziers to finish lambs. This could provide sustained demand for the lower grades of wheat going forward.
US and Russian winter wheat crops both experienced dry conditions for sowing which meant a delayed establishment. They have received rainfall recently which has definitely helped, but crops are at risk of being vulnerable as they head into the winter months. They will require a blanket of snow to protect the plants from “winter kill”. If a sudden cold snap occurs before the snow arrives, it could spark a rally in the market.

Downside potential

The NSW wheat crop seems to be getting bigger than expected as harvest draws to a close. Growers are currently holding a high proportion of the crop, waiting for signs of demand. Ultimately it will come to the market and this may supress any demand rallies that do appear in the coming months. It appears that WA is seeing better than expected yields as well, with overseas buyers are taking note of this too.
Argentina is about to harvest their crop and it will be competing with Australia in the export market, as northern hemisphere supplies run down.
Northern NSW and Southern Queensland have enjoyed good rains for sorghum planting. A big sorghum harvest in the first half of next year could keep a lid on domestic feed grain markets.

The information contained in this article is given for the purpose of providing general information only.

Grain Market Update - Wheat (November 2024)