Rural Bank's James Maxwell says canola prices an anomoly

Wheat prices have fallen in the past month, with prices expected to be softened by a weakening Australian dollar and exchange rate.

Barley, on the other hand, is looking optimistic due to ongoing Ukraine-Russia tensions and a sub-par crop throughout the Americas.

The main problem WA faces is getting out the record-breaking supply from this season that the world desperately demands, while prices are hot, according to Rural Bank cropping analyst James Maxwell.

Canola price outlook

Two seasons ago Canada, the world's largest canola producer, had one of its worst crops in 30 years due to a large drought.

This meant the next in line for canola exports was Australia.

Pressures were also increased due to the Russia-Ukraine war, which aren't big canola exporters, but do export a large amount of sunflower crop - a substitute for canola oil, Mr Maxwell said.

"That lifted the price of all vegetable oils, a lot that is used for similar things, such as cooking or biofuels," Mr Maxwell said.

"We had an extraordinary year because we had massive production when there was quite low supply in the first place and there was this big boost from the Russia-Ukraine war."

With canola reaching exceptional prices of $1200 to $1300 a tonne last season, Mr Maxwell said growers should be expecting about $700/t this coming season - which is still much higher than the five-year average.

"If you go back five years, $700 was the magic number - if the price hit $700, then that was it, everyone was selling," Mr Maxwell said.

He sees this price staying steady for the next couple of months.

With a record-breaking canola harvest from Australia and a good production season from Canada, supplies are almost back to normal.

Another softener in the canola market is Germany, one of Australia's biggest customers, suggesting they no longer want to use crops for biofuels and a large proportion of Australian crops are used for biofuels.

"With the short supply of food and the increased cost of living in Germany, they have said we should stop using crops for fuel, and we should be using it for food instead," Mr Maxwell said.

"That does raise some concerns about the future."

Previously there had been optimism in the market that China might start buying Australian canola, but it is becoming increasingly evident to analysts, such as Mr Maxwell, that this may not eventuate.

He described this season as "absolutely extraordinary" with record production across the State, massively outperforming the rest of the country.

In WA, just over two million tonnes has been exported since October - a 130 per cent increase on the State's five-year average - compared to the 765,000t exported by the rest of the country.

It's enough to make any farmer feel a little bit patriotic about WA.

Wheat price outlook

Wheat prices have decreased month-on-month, but have found some support in the last week as harvest pressure eases.

A weakening Australian dollar has also lent support to falling wheat prices, due to WA having a "massive exportable surplus," being a predominantly export-focused State.

"That means we're going to take a lot more direction from global prices from the Chicago Board of Trade (CBoT), but if there was lower production, then it wouldn't have as much of an impact because the domestic demand would have more of a say," Mr Maxwell said.

With a larger export surplus, WA is more beholden to international prices - with Australian wheat prices following the steady incline seen with the CBoT.

"You're getting a little bit of volatility depending on what the dollar is doing," Mr Maxwell said.

Strong demand for Australian grain has seen a record export pace in the first four months of the marketing year, with China remaining the number one buyer of Australian wheat.

Since October 4.6m/t of wheat has been exported from WA, according to Rural Bank, which is 41pc above this time last year.

However, despite strong demand and record export pace, ending stocks for 2022/23 are projected to finish at record levels.

Mr Maxwell believes there is simply not enough export capacity to meet demand, with shipping slots booked for the season.

"Even a relatively minor delay to a supply chain has knock-on effects, and it does tend to draw out," he said.

"If the supply chain runs smoothly, there's no doubt that we are going to have record exports."

With forecasts predicting a drier year Australia-wide, Mr Maxwell doesn't expect next season to be as successful, and said that will give farmers an opportunity to offload ending stocks next year.

Barley price outlook

While barley doesn't have an international standard, like wheat, barley prices tend to follow that of the wheat markets.

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A majority of Australian wheat is used for stock feed, as is barley, so an increase in feed wheat prices is often reflected in barley.

Barley is most significantly impacted by corn, another global feedstock, which hasn't had "fantastic" production in South America and the USA.

Due to a bad season, the price of corn is relatively similar to the price of feed grain, resulting in countries like Vietnam to make the switch to Australian grain.

"We have seen them purchasing Australian feed wheat instead of corn at a similar price, as it has a high nutritional content, so the fact they are doing that supports barley as well" Mr Maxwell said.

The Middle East, which would normally purchase from Ukraine, is also purchasing a large proportion of Australian feed barley due to supply uncertainties.

Mr Maxwell said he was anticipating barley prices would remain relatively firm, and he was optimistic for a gradual upside.