AUSTRALIA’s 2017/18 grain export program, now almost four months into the October-to-September marketing year, tells an “average” story of Western Australia’s shipments to date and and of how eastern Australia’s shipments have collapsed from its big-crop fuelled bonanza of a year earlier.

Against a tighter level to start-of-season cereal grain stocks than the market had originally anticipated (somewhat confirmed by ABS’ recent assessment of the 16/17 crop), exports out of Queensland and New South Wales have had a muted start compared with previous export years.

Total eastern states’ grain production for 17/18 is estimated to be 9-10 million tonnes (Mt), and this low supply, combined with higher prices relative to other states, does not support a robust export program.

Though it is expected shipments will pick up towards the middle of the year, season-to-date vessel activity shows only around 300,000t of grain shipped, mostly last season’s grain.

Customs data confirm this as the slowest start to the marketing year since the droughts of 2006/07 and 2007/08.

Situation improves

Australia’s export program is improved by better winter-crop conditions in Victoria, where consistent weather over the winter months had helped maintain production on par with the historical average.

Total exports from Victoria’s ports, Geelong, Portland and Melbourne, have topped 1Mt since October, consisting of wheat, barley and canola.  January’s shipping schedule accounted for a third of total volume and February’s is steadily building.  Whilst this is no comparison to last year’s significantly larger program, it tracks closer to an average first quarter for exports.

The South Australian export program is trending closer to average, with the 17/18 crop supporting the strong end of the previous season.  South Australia’s 2017/18 crop helped provide a floor for Australia’s overall crop.  November rains salvaged production on Eyre Peninsula and the rest of the state’s crop areas were generally intact.

Bulk cereal exports to January exceeded 6Mt and the February shipping program already shows 1.5Mt export bookings.

It looks like business as usual in Port Adelaide and Port Lincoln; there is no remaining capacity in those ports for the first half of 2018.

Western Australia’s export program is keeping pace with previous years.  It had exported 3.4Mt from the start of the marketing year in October 2017 until January 2018, compared with 3.5Mt average.

The question now is whether the pace of WA exports can continue for the first half of 2018.  Its wheat crop was close to 8Mt, helped by timely rain after a pessimistic start to its season.  Barley receivals in WA were 3.5Mt.

Wheat flowing from Black Sea and Argentina

Australia’s wheat supply, exportable surplus after domestic consumption, should be able to handle a 15-16Mt wheat program this year.

However, for Australia’s major wheat export states, WA and SA, the question turns away from a “supply” focus.  Not only does Australian wheat have an uphill battle ahead from Black Sea and Argentine wheat remaining competitive against Australian Premium White and Australian Standard White wheat markets, but also India will be nowhere near as active as an importer of Australian wheat as it was in 2016-17.

China and Australia’s south east Asia trading partners nevertheless provide inelastic demand for wheat.

Barley demand has been more consistent into China for this time of year, and largely responsible for total export volume remaining close to average.

All in all, it looks like Australian grains will make a go of it this year on the international arena. It will be however, a lower scoring affair than last season.

Source: COFCO

Nidera’s guest author, Melbourne-based COFCO research analyst Dim Ariyasinghe contributed the story this week.

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