A crop of Hyola canola shows the benefits of a kind start to the growing season in south-west NSW. Photo: Barry Haskins

THE OUTLOOK over the next six months for the Australian grains industry months is mixed, with dry seasonal forecasts concerning some regions, but strong export demand and favourable prices keeping the market positive, according to Rural Bank’s latest report.

The Rural Bank mid-year outlook confirmed that during the first half of the year, growers operated in a varied environment with mixed seasonal conditions driving contrasting production, and volatile commodity prices.

“The challenging autumn across many regions has led to crops emerging under varied conditions,” the report said.

“Timely rain and a kind spring finish are crucial for meeting current production estimates.

“Some regions are well-positioned to achieve above-average yields, while others face challenges due to uneven rainfall distribution.”

Southern Queensland and New South Wales are stand-outs with consistent autumn rain; however, conditions are less promising in Western Australia, South Australia, and Victoria.

WA requires follow-up rain, while SA and Victoria “have a big moisture deficit”.

Market outlook

The report said demand from export markets and the feedlot industry should remain positive for the next six months.

“High numbers of cattle on feed, reaching a record 1.35 million head in the March quarter, signals strong domestic demand for grains.

“The good outlook for world beef markets fuels optimism among feedlot operators.

“It suggests that grainfed cattle numbers will likely stay high in the second half of 2024.

“This translates to continued robust demand for grain from the feedlot industry.”

Wheat

Australia’s wheat exports for the 2023-24 season are on pace to reach 20 million tonnes (Mt), with more than 80 percent of this volume being shipped by the end of June.

As a result, carryout is expected to be the lowest since 2019-20.

“This tight supply leaves little buffer for unforeseen events in the latter half of 2024.

“Any supply-side shocks or harvest-related disruptions could trigger price hikes as the market strives to balance export commitments with domestic needs.”

Rural Bank western Victoria regional manager agribusiness Wayne Saunders said the global wheat market continued to be dominated by developments in Russia.

“Recent price rallies due to Russian production concerns allowed growers to make solid sales, nearing completion of old-crop marketing,” Mr Saunders said.

“Prices have since eased due to stabilised production estimates for Russia and selling pressure from the Northern Hemisphere harvest, but Black Sea-European shortfalls of 20-25Mt suggest a smaller harvest pressure window.

“Low domestic ending stocks add another layer of support.

“We maintain a neutral near-term outlook on wheat prices due to Northern Hemisphere harvest pressure, but hold a positive longer-term view due to tightening global stocks.”

Barley

Barley exports for 2023-24 are forecast to total 7.6Mt, with Chinese demand following the removal of its tariffs in August last year driving the volume.

This, combined with a decline in production in 2023-24 from adverse El Niño weather impacts, will see very low carry-in stocks for 2024-25.

With domestic demand to remain strong, 2024-25 exports are forecast at a five-year low of 6Mt; however, strong demand from China is expected to see prices “remain well supported”.

Globally, EU production was forecast to be at a four-year high of 53.8Mt, and its exports are expected to grow 12pc from 2023-24 to 7.3Mt to make it the top exporter in 2024-25.

“They will help meet the market’s needs and keep a lid on prices,” the report said.

Canola

Australia is on track to achieve strong canola exports of 5.8-6Mt for the current 2023-24 marketing season.

As with wheat and barley, ending stocks are expected to be tighter compared to recent seasons, which is set to be compounded by a drop in domestic production.

This will lead to an estimated export volume of 4.5Mt for the 2024-25 season.

Rising demand from the EU will provides opportunities for Australian canola, but improved Canadian production is expected to impact demand for Australian canola in South America and the Middle East.

“We would expect to see more limited upside for local canola markets coming into winter.”

The report said this will be the result of increased competition from higher availability of palm oil and a record Brazilian soybean harvest, alongside waning export demand from the EU as Ukraine and Canada enter the market.

It said “strong export demand” will return from the EU later in the year.

“While the prospect of near $1000-per-tonne canola prices are well behind us, these positive factors may very well see canola prices on the east coast push back above the $700/t mark in late 2024.”

Pulses

The report found pulse exports have been strong at 1.1Mt by the end of June, with lentils the stand-out.

“However, the recent rise in container freight rates has the potential to have an impact on local prices for the rest of the season and into new crop.

“The Drewry World Container Index (WCI) has risen 77pc since late April.

“Container freight rates continue to look quite unstable beyond June-July; the major factor is the geopolitical instability in the Middle East, especially in the Red Sea region.

“Increasing container freights rates into the subcontinent will make it difficult to compete into these markets at current values.”

Chickpeas and lentils have both seen uplifts due to reduced or suspended import tariffs into India.

Despite new-crop chickpea prices remaining above $1000/t and ideal conditions in parts of Qld and northern NSW, Rural Bank says selling has been limited.

“Depending on the size and quality of the crop, these prices are bound to face some selling pressure at some stage.

“Analysts are forecasting a deficit of 2Mt in India for the 2024-25 season, which is unlikely to be satisfied by chickpea imports, with peas needed as substitutes.

“As a result, the Australian market is expected to remain well supported around current levels.”

Reduced lentil import tariffs, which are set to continue through to March 2025, has seen prices hold relatively steady around $900/t for most of this year, lifting to around $1000/t on the back of positive news on Indian chickpeas.

The report said short-term prices could be pressured lower due to good crop conditions in Canada, but global demand will “remain good” following poor results in Turkiye and India.

“Lentils should remain steady with good demand from India, with prices to remain in the $880-$900/t range.”

Source: Rural Bank