ABARES’ estimate for Australia’s wheat crop now being harvested is seen as having considerable upside when the national forecaster revises its numbers on Tuesday in the December-quarter Australian Crop Report.
As a likely bellwether, independent analysts Australian Crop Forecasters (ACF), Lachstock Consulting and IKON Commodities all have numbers sitting above ABARES 32.6 million tonnes (Mt) released September 7.
Across the mainland, harvest is getting close to 30 per cent complete, with much of Queensland finished, and Western Australia making good progress, but rain is delaying ripening and operations in other states.
Queensland recorded better-than-expected yields, and flour millers and exporters are breathing a sigh of relief that its wheat quality was excellent, but quality and yield in other states is a developing picture.
Lower protein assured
Australian Crop Forecasters senior insights manager James Maxwell said while the extent of rain-related downgrading was too early to call, the protein profile of Australia’s 2021-22 wheat crop would be lower than average, and well down on last year’s remarkable crop.
“We’re estimating that half of the crop will be ASW or lower quality, including off grades like AH9, compared to an average of around 35 per cent,” Mr Maxwell said.
“We’ll have to wait and see what happens to Victoria and South Australia, but anyone who can produce protein will be sitting on a goldmine.”
IKON Commodities earlier this week said the latest rain will likely increase the amount of Australian feed wheat to around 6Mt, triple what turns up in most normal years.
“It’s still a far cry from 2010-11, with about 14Mt,” IKON stated.
Export markets are highly unlikely to be big competitors for Australia’s downgraded wheat, but the domestic market is likely to absorb it over time.
“Bear in mind too that Australia feeds domestic animals close to 5Mt of wheat a year.”
|Tas||0.1||Not identified separately||Not identified separately||NQ||0.1|
Table 1: ABARES September estimates for Australia’s 2021-22 wheat crop against more recent forecasts from Lachstock Consulting, Australian Crop Forecasters and IKON Commodities and their average. Million tonnes. NQ – not quoted. Rounding makes total not add.
|Qld||0.4||Not identified separately||0.4||NQ||o.4|
|Tas||less than 0.1||NQ||NQ||NQ||less than 0.1|
Table 2: ABARES September estimates for Australia’s 2021-22 barley crop against more recent forecasts from Lachstock Consulting, Australian Crop Forecasters and IKON Commodities and their average. Million tonnes. NQ – not quoted separately. Rounding makes total not add.
Downgrading widespread in NSW
Mr Maxwell said patchy yield losses in New South Wales due to recent wind and rain are not widespread or significant enough to cut production, but quality has been hit.
“Queensland managed to get most of its wheat off before the storms and from all reports the quality was good – H2 or better but more APH2 than APH1.
“Northern NSW managed to get a fair bit off before the storms hit, but the quality wasn’t as good as Queensland with the bulk being H2, APW and ASW.
“Anything not cut before the storms has most likely gone straight to feed.”
Central NSW has been hardest hit with downgrades, and Mr Maxwell said the system moving through southern NSW is likely to cause downgrading on ripe crops.
“Victoria is pretty delayed, and hasn’t really had a clear enough run for wheat to ripen yet so we haven’t seen downgrades yet, but with the frequency of these heavy rainfall events, it pretty much just seems like a matter of time.
“The soft finish is going to see lower protein profiles anyway, regardless of whether there is resprouting causing automatic downgrades to feed.”
South Australia is in a similar situation to Victoria, and early deliveries point to almost half making H specifications, and most of the rest being APW.
Western Australia is said to have received less than 10 per cent in off grades, namely GP and AUH2.
“We expect this to deteriorate as harvest ramps up in southern areas.
“Around half of WA receivals are ASW and low protein is a feature of pretty much all receivals.”
Spring rain boosts yields
In its wheat supply-and-demand report released November 11, Lachstock Consulting said spring conditions have been excellent and early harvest results have been amazing, matching last year’s bumper crops in many areas.
Lachstock is currently sitting on 34.8Mt for wheat, but a crop of more than 35Mt is possible if rain events are kind.
“There’s a high risk of downgraded wheat at the moment in NSW especially, with northern NSW 30pc harvested at best,” Lachstock’s report said.
“Queensland is in a safer place with 90pc in the bin.
Earlier this month, Lachstock estimated that 1.5Mt of wheat had already been downgraded, and that was likely to double given the forecast.
“The export pipeline and capacity is the ultimate part that is now more important than production.
“We are maxing out in most states, with WA monthly wheat exports usually topping out at 1Mt, SA and Victoria at 550,000t each, NSW at 750,000t and Queensland at 150,000t on average.”
Lachstock said the next step is for Australian wheat to price basis at a discount that gets more export business through the June-September inverse.
“Australia is currently $20 cheaper into South-east Asia for that period, so we have upside in exports if we can hold here on basis.
“Otherwise, Australia carries grain in WA and NSW into the 2022-23 season.”
However, a proliferation of wheat downgraded to feed will not help.
“It’s harder and slower to sell into the export customers, farmers will be more retentive, blending and out-turns will be slower.
“The domestic market will want to carry more of this feed wheat given where basis levels and grade spreads will sit.”