It’s not new news to producers that as grain harvest kicks off, the weight of supply tends to push prices south. This year shouldn’t be much different in that respect, but the delayed harvest in the east,, and reasonable expectation that excessively damp conditions in many areas will negatively impact quality is worth examining a little closer in practice to see how the season is playing out so far.
Let’s look at what we know about the new crop grain supply situation so far, by looking at harvest progress estimates and grain receivals. In WA, CBH’s latest harvest update reveals that the WA harvest officially kicked off on the 27th of September with a canola load coming into Geraldton, however, grain receival really didn’t ramp up till the start of November. The good news in WA is that record breaking export loadings in recent months have allowed CBH to reduce the inventory of old crop carry-over gain in inventory to 3mmt, leaving plenty of headroom available to store the new harvest. November receivals have totalled 3.93mmt so far, (figure 1) with the pace currently standing at 1.5mmt/week, and with over 60% of volumes being canola, with some wheat, barley, malting barley, oats and lupins also coming in, with the Geraldton zone reporting the most significant proportion of wheat, at 48% of volumes. Kwinana North has suffered widespread hail damage, despite this, the quality of received canola and barley has been good. Bunge Bunbury is bidding $415/ton for APW1 wheat, with post harvest march delivered contracts at a $12/ton (2.9%) premium
On the east coast, Viterra reports that it has 10mmt of storage capacity available for the 2022/23 harvest. So far, it’s SA facilities have received 556kt of grain, with 73% coming from the western region, comprising primarily of Canola. The central region is receiving Barley, Canola & lentils, while the eastern zone is just starting to see canola come in. (figure 2)
Further east, GrainCorp has reported that harvest progress has been slow in NSW and VIC due to sluggish crop development, and rain impacts delaying harvest. The latest harvest report indicates that 1.7mmt of grain has come in so far. (figure 3) The central Queensland zone is leading the pack, demonstrating the highest yields in over a decade, accounting for over 500Kt so far. Further south, In Goondiwindi & Narrabri, harvest is beginning to ramp up after some fine weather helped paddocks dry out. Down in southern NSW, the VIC Mallee and Swan Hill, soggy paddocks continue to impede machinery access for harvest. More broadly, delayed harvest has caused multiple commodities to be delivered simultaneously, with harvest compression expected to put more pressure on the network as volumes increase.
With regard to shipping, there have been mass cancellations of bookings across the east coast from December onwards, with the actions sparked by harvest delays and quality concerns stemming from the wet weather.
On the west coast, Kwinana (which has received 46% of total CBH total tonnage so far) canola prices have fallen back 5% sicne October 31, but similarly, in Europe, our key export market, MATIF canola has dropped back 13% in tandem (figure 4), so there is far from strong evidence of grain flows being intense enough just yet to put a big dent in domestic pricing. However, in Geraldton, which represents 38% of CBH grain receivals this season, Canola prices dropped 6%. Again, though, its miles away from being able to make a categorical call on harvest pressure price impacts at this early stage of the game. SA is a similar story, with Port Lincoln prices only dipping 3%.
Angus had a look at wheat prices earlier this week, and came to the same conclusion, that harvest pressure doesn’t seem to have kicked in just yet.
What does it mean?
At this stage, harvest pressure has does not seem to have severely dented domestic canola pricing in Kwinana, WA, and SA, at least, Furthermore, wheat is following the same story. More broadly, grain deliveries into port & storages has begun, albeit later, and behind the usual schedule. On the upside, this has freed up capacity to clear out old season stock, but on the other, this harvest could prove to me much more compressed on the east coast as paddocks dry out, and grain flow turns into a multi-commodity torrent.
- WA grain & oilseed receival volumes at WA’s CHB reach 3.93mmt, @60% canola.
- Reported grain receivals on the east coast reach 2.25mmt, with 57% coming from QLD.
- Kwinana Canola prices aren’t visibly impacted by harvest- the downswing in prices seems to be influenced by the canola price in Europe.
Click on figure to expand
Click on figure to expand
Data sources: Reuters.
Photo Credit: Tamara Ward