Harvest selling puts pressure on prices

Wheat deliveries are providing a clearer picture of yields and quality, with higher than expected yields in eastern Australia and quality holding up well despite some rainfall during harvest.

The 2020/21 Australian wheat crop is estimated to be the second largest on record at 30.5 million metric tonnes (mmt), eight per cent below the record from 2016/17.

Reports of higher than expected yields in the Eastern States is supporting the estimate of national production doubling from last season.

Despite some November rainfall, wheat quality has held up well with higher than expected protein levels seen in Queensland and New South Wales.

This has led to the national wheat profile favouring higher protein grades, with APH and AH accounting for 29 per cent of the grade splits compared to an average of 23pc.

In Western Australia, wheat production for 2020/21 is estimated at 8mmt, only up 35pc from last season due to the relatively drier year compared to what the Eastern States have received.

Despite dry conditions in spring and a lack of soil moisture for much of the season, protein has not been as high as anticipated in receivals from northern areas.

As such, the profile of WA wheat is slightly more weighted toward lower protein grades compared to average, with 30pc of wheat expected to be graded as ASW and only 12pc as AH.

Rainfall that has come during harvest in WA does not appear to have affected quality too much.

This has helped keep grade spreads in the Kwinana zone fairly consistent during the harvest period with H2 at a $6 per tonne premium to APW1, while discounts for ASW1 and AGP1 have remained steady at $15/t and $30/t, respectively.

While grade spreads have remained relatively consistent, prices have eased 10-12pc since mid-October due to harvest pressures.

A larger crop is expected to create a larger exportable surplus and see Australia export 19.5mmt of wheat in 2020/21, an increase of 10.4mmt from last season.

Competitive pricing of Australian wheat is helping to attract strong export demand for the larger exportable surplus.

Demand is particularly strong from South East Asia which is forecast to be the destination for more than half of Australian wheat exports in 2020/21.

China has been buying large volumes of grain lately, showing a strong appetite for Australian wheat along with United States' corn and soybeans.

There is potential for about 2mmt of Australian wheat to be exported to China in 2020/21, however uncertain trade relations between Australia and China adds a large degree of caution for this estimate.