AFTER a high-output season, Western Australia is predicted to experience price slumps for grain and canola as farmers try to sell high volumes of the commodities.
This comes with the United States Department of Agriculture (USDA) expecting a global wheat demand decline of almost 0.5pc year-on-year by the end of 2022/23.
Rabobank agricultural analyst Dennis Voznesenski said due to an expected sizeable Western Australian carry-over, prices were likely to be comparably more pressured through 2023 compared to the rest of Australia.
Rabobank expects the Chicago Board of Trade wheat to trade on average between US728c to US775c/bu in 2023, which is equivalent to AUD$380 to $410/tonne, while non-GM canola prices in WA are expected to trade lower due to a proportionately larger expected carry-over stock, with an average $30-40/tonne discount.
Australian wheat production is predicted to "revert to average levels," given the Bureau of Meteorology's seasonal outlook for drier weather across Australia.
"On both sides of the country, 2022 was a strong rainfall year, which supported farmers in achieving high yields," Mr Voznesenski said.
"However, for parts of eastern Australia it was too much of a good thing, and devastating floods washed away otherwise record yields."
Reduced farmer selling is also expected through 2023, as farmers are able to market more strategically with increased onfarm storage.
"A large proportion of farmers do not have an urgency to sell their entire crop due to a healthy financial position, and they may be waiting for the next financial year before selling for tax purposes," Mr Voznesenski said.
"We expect to see these factors supporting a smaller price discount to overseas levels, continuing between now and mid year."
Grain price predictions for the upcoming season are heavily influenced by speculation of whether conflict in Ukraine and Russia will continue.
Global wheat markets are expected to rise due to reduced supplies year-on-year out of the Black Sea, according to Mr Voznesenski.
Ukraine is expected to see a 10 per cent to 20pc reduction in winter wheat planting, while dryness over Russia will make another record crop unlikely.
There is considerably more canola in the market, both globally and locally, in 2023 and the global availability of canola improved significantly since harvests started rolling in from June 2022.
"April to May and October to December may see increased demand for Australia canola, but the rest of the year appears less exciting," Mr Voznesenski said.
While Australia harvested more than 7 million tonnes of canola for the second year in a row, the rest of the world also recorded record harvests.
Mid-year, Europe harvested 19.5mt, up 2.3mt year-on-year.
In September, Canada - the world's largest exporter - harvested 19mt, up 5.2mt year-on-year.
"Even Ukraine saw a 0.19mt production increase last July, with the crop planted prior to the war commencing," Mr Voznesenski said.
According to the USDA, ending stocks in Australia, Canada and Europe are expected to be 1.5mt, or 72pc higher year-on-year by mid-2023.
Mr Voznesenski predicts increased demand for Australian canola in April and May, given that the European harvest doesn't start until June/July.
"In anticipation of Canada's new domestic demand, we may see a slowdown of their canola exports in late 2023 during Australia's harvest, adding more support than normal during that time period," Mr Voznesenski said.
"Canada is set to finish constructing 3.6 million tonnes of new canola crushing facilities in early 2024.
"In order to fill local demand, Canada's typical 10mt of export will have to decline."
Major canola exporters are reporting marginal increases in planting this season, including the EU and Canada.
According to Mr Voznesenski, Ukraine's planting is expected to be down year-on-year between 10pc and 20pc, which is a much smaller decrease than wheat, given that proportionately more of Ukraine's canola is grown in western Ukraine.
"The rest of the year looks far less exciting for prices," Mr Voznesenski said.
"With global supplies of canola and soybeans significantly higher year-on-year, we will see the world well supplied with oilseeds outside these windows, barring another war or significant drought in Europe or Canada - $1000 tonne price levels are unlikely."
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