Pouring of grain from above

Earlier this week, the December ABARES report made some revisions to Australian wheat production which weighed heavily on the market. Total wheat production is factored at 31.2mmt - the second highest on record. NSW and VIC are both looking at record production with SA expected to reap an above average crop. Based on current deliveries, WA is also on track to deliver at least an average crop.

Similarly, barley production in Australia is forecast at 12mmt, also the second largest on record.

While a +30mmt crop has long been expected, the published revision always seems to catch a few on the wrong side of the market.  This is where the crunch came – further liquidation of long/bought contracts on the basis of increasing major exporter supplies.

The wheat from Australia will go head to head against Black Sea wheat into the Middle East and Asian markets.  Russian production has been pegged at a massive 85mmt, so competition into these homes will likely be fierce.  Similarly, barley will face competition from European and Black Sea origins into key North African and Middle East markets.

In other global news, SovEcon have increased the expected Russian exports to 40.8mmt.  Traders are likely to try and speed up exports ahead of a mid Feb ’21 export quota coming into effect.  The origin of this quota is to try and limit domestic wheat and flour prices, and not a reflection of supply.  It is not expected to have any effect on prices. 

Russian AgMin has forecast a record 19.3mha of winter crops have been sown, compared to last year’s 18.1mha.  IKAR have estimated that 78% of the winter crop is in fair/good condition, implying that 22% is in poor condition – the poorest since 1993.  There will remain questions around the condition of the crop as it moves into dormancy, but expectations are for another large crop in 2021.

French market analysts expect the EU wheat crop to rebound from last year’s rain interrupted crop.  Planting of soft wheat is reported at 99% complete and crop condition at 96% gd-exc relative to last year’s 75% gd-exc.

StoneX reports that Chinese imports of wheat are up 164% to 6.7mmt.  The USDA believes that China will import 8mmt in total for this marketing year. I wonder if Australia will get a nod?

The week ahead….

Futures and cash prices are on the slide.  Harvest pressure and building global stocks adding weight to the bears.  Demand will need to emerge to halt the slide.

Have any questions or comments?

We love to hear from you!

Click on graph to expand

Click on graph to expand

Click on graph to expand

Data sources: ABARE, SovEcon, CRMAgri, IKAR, StoneX, Mecardo. 

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
Grains & Oilseeds

Jack tours Russia

To start the week, the wheat market got a very nice little push courtesy of Russian frosts, a bullish USDA report and technical short covering.

Read More »

Want market insights delivered straight to your inbox?

Sign up to the mailing list to get regular updates to new analysis and market outlooks

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
Listen to the podcast

Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.

Photo of a farmer surrounded by Merino sheep in dusty yards
Research: Analysis of the Australian sheep flock

In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making. 

Image of harvested grain pouring into a chaser bin

We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.