Markets

Australia’s big wheat year big on low protein: AGIC Asia

Liz Wells, March 3, 2022

AUSTRALIA is in the midst of shipping its biggest wheat crop ever, and according to a panel speaking at the Australian Grain Industry Conference (AGIC) Asia Live event yesterday, it has not been hard to sell in spite of its less-than-ideal quality profile.

The national 2021-22 (Oct-Sep) crop is seen by ABARES at 36.3 million tonnes (Mt), and USDA estimates exports at 25.5Mt, behind only Russia on 35Mt in 2021-22 (Jly-Jun).

Demand strong

CBH head of trading Ben Tiller said Western Australian wheat was selling into a range of destinations, and having close to half the WA crop being ASW with 8.6 per cent average protein had presented no marketing headaches.

“What we have seen is the market’s readiness or willingness…to acquire that volume,” Mr Tiller said.

“We’ve seen very strong demand from China for this type of wheat.”

Australian grain traders have this year been saying China has bought up to 5Mt of low-pro Australian wheat.

“That’s a dramatic increase, nearly double the previous volume into that market.”

Mr Tiller said The Philippines, Indonesia and Vietnam were also buying low-protein wheat.

Mild and mostly favourable growing season had weighed on protein in WA, the only mainland Australian state to have no problems with falling numbers as its wheat harvest was a fast and dry one.

Mr Tiller said less than 40pc of CBH’s 2021-22 wheat receivals in WA made 10pc protein or more.

“This compares with more than 50pc a year earlier.”

CBH receivals indicate its ASW receivals as a percentage of the crop are more than double last year’s 27pc.

GrainCorp Asian trading director Michael Jester said the quality of wheat harvested in Queensland was high, and Victoria, where many crops were late enough to benefit from November rain, was largely an average one in terms of quality profile.

However, the NSW wheat crop, where all but the earliest Prime Hard-type crops were harvested before the rain hit, copped the full brunt of the rain.

“Here is the problem,” Mr Jester said.

WHEAT 2021-22 High protein Mid protein ASW or below Crop size
Qld APH1/2 29pc APW/H2 55pc 16pc 2.4Mt
NSW APH 6pc APW/H2 26pc 68pc 13Mt
Vic AH 28pc APW 25pc 46pc 4.4Mt
SA AH 20pc APW 23pc 57pc 4.7Mt**
WA AH 6pc APW 33pc 59* 12.8Mt**

Quality profiles of Australia’s 2021-22 wheat crop. Source: CBH, GrainCorp, Viterra. * includes Noodle wheat **ABARES figure

The trade has since late last year been talking about NSW producing 6Mt of wheat with a low falling number, an indicator of sprouting caused by rain on ripe grain.

Mr Jester confirmed that, and estimate that 40-45pc of NSW wheat is feed.

“We are talking 5-6Mt out of a whopping 13Mt.”

He said it was being consumed domestically, and also going to destinations including China, South Korea and Vietnam.

Mr Jester said some of the feed wheat was being sold with a high-protein profile of 13pc, which made it appealing to ration formulators.

“We have record high soybean meal prices, and the more protein you can carry in your feed wheat, the less you have to add.”

Viterra’s grains trading manager Australia and New Zealand Simon Gellert said the SA crop did not escape rain at harvest.

“We were fortunate the downgrading was quite localised and didn’t affect the whole state,” Mr Gellert said.

“That’s mean that there’s been a good spread of grades available right across the state.

WA dry as planting approaches

Australian farmers will start planting their 2022-23 wheat crop next month, and WA and parts of Victoria are where rain is needed most to allow seeding to get going at the ideal time.

Mr Jester said wide areas of the east coast and into SA had adequate to full soil-moisture profiles already, but rain was needed in southern parts.

Mr Gellert said many parts of SA have had good summer rains, with some exceeding their average by more than five times.

“For those regions, this sets the season up nicely,” Mr Gellert said.

Mr Tiller said higher input costs, less attractive gross margins for cereals in particular, dry conditions, and increased grower risk aversion could all temper WA’s crop area this year.

“Globally, the cost of putting in a crop has gone up significantly, primarily due to higher fertiliser and herbicide prices.

“This will result in less area sown; how much is yet to be known.”

Mr Tiller said gross margins were favourable for canola but negative for cereals.

“Growers have not seen negative gross margins for some time.

“At this point, there should be more fallow in lower-rainfall regions.”

Mr Tiller said canola area could increase in WA’s medium and high-rainfall zones, and barley may be swapped out for wheat because of barley’s reduced upside in price by comparison.

“After a number of good years, the majority of WA growers find themselves in improved financial positions.

“Given high input costs…it is likely that WA growers may play a more cautious hand in 2022.”

“Ultimately, the total area of crop in the low-rainfall zone will be driven by the amount of rainfall in April and May.”

He said these regions were “completely dry” at present.

“Little rain, if any, has been received across the Wheatbelt in 2022.”

In SA, Mr Gellert said canola plus a variety of pulses as well as cereals was flowing to export out of the Viterra system, and indications were that growers could be ratcheting back their cereal areas for 2022-23.

“We expect to see an increase in planting of faba beans and canola at the expense of wheat and barley.”

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