AUSTRALIA’s grain exports have shot to record volumes this year as bumper crops push down prices, but levels may fade towards year-end as rival shipments step up from the Black Sea region.

Wheat, canola and barley exports have been over 60 per cent higher than normal over the first five months of 2017, at 17.2 million tonnes (Mt), according to Thomson Reuters Eikon data.

That flood of grain from Australia, the world’s fourth largest wheat exporter, and other suppliers is dragging on global prices that are trading close to last September’s 10-year low.

Big crops, cheap prices

“There are two key reasons for strong flows of grain shipments from Australia,” a Singapore-based trader with an international trading company said.

“They had massive crops and they were cheaper than any other origin.”

Australian Standard White (ASW) wheat had been selling for US$185-$195/t, free on board since January, well below the price from other origins, traders said.

The country’s 2016/17 wheat production, at 35.13Mt, was around 17pc more than the previous record of 29.6Mt set in 2011/12. Barley output was 25pc above the prior record at 13Mt, while canola production of 4.1Mt was 1pc shy of an all-time high, according to official data.

But industry sources estimate the country will be left with just 5-6Mt of wheat by the end of Australia’s grain marketing year in September, similar to last year’s levels, due to the scale and pace of exports.

“India has taken more wheat, China is taking lots of barley and we have got back into the Iraqi market,” analyst with brokerage IKON Commodities in Sydney, Ole Houe, said.

“Demand is strong everywhere.”

China is taking higher quality Australian wheat and other feed grains such as barley and sorghum.

India has been buying aggressively this year to fill a supply shortfall left by two years of drought, although purchases have eased in recent months.

“We have been seeing some strong demand from traditional markets, but also from markets that we haven’t done much business with for the past few years,” CBH Group wheat trading manager, James  Foulsham, said.

Headwinds bite in August

In the second half of 2017, Australian wheat will likely face stiff competition from Black Sea region new crop sellers such as Russia and Ukraine.

Last week, for example, a miller in Indonesia bought for August arrival around 60,000t of Black Sea wheat at US$190/t cost and freight, traders said. A similar variety of Australian wheat was priced at US$215/t.

Source: Reuters