Same Same... But Different?
By James Urquhart
AWB East Coast Manager
Perhaps driven by the social media activity depicting crops being abandoned or cut for hay, there is a sense of deja vu as we approach this year’s harvest. Broadly speaking, the areas of supply and deficit are not too dissimilar to those of the previous year and with the strong possibility of a smaller national wheat crop there is some bullishness about the prospects for harvest pricing and beyond. So whilst it ‘feels’ like a carbon copy of last year, is it? Crystal ball gazing is a pastime likely to result in egg on face, but there are some structural differences to the market this year that could mean the story unfolds in a slightly different fashion this time around.
With a negligible export program last year, it was the domestic consumer that was the ultimate buyer of much of last harvest’s grain. Whilst this remains the likely scenario for the coming 12 months, it might be anticipated that having purchased a large portion of their annual requirements at the peak of the market last year (harvest time) the consumer takes a more disciplined, hand-to-mouth approach this year.
Further to that, large trading houses bankrolled a high priced environment last harvest and later felt the pinch. Considering the current inverse in the market, high prices versus other origins, a lacklustre export outlook and the absence of any strong market signal to go long wheat, the experience of last harvest might be enough curb any trader’s appetite to stand in front of a wave of grower selling.
On the supply side of things there are also some other new, or different inputs to consider versus this time last year; Like it or not, the Canadian import supply chain is in place and expected to continue. Australian barley stocks will be somewhat higher due to increased hectares planted, and the ongoing Chinese anti-dumping investigation leaves us without a major outlet to help tighten the SND. Central QLD is in the midst of a reasonable harvest and is satisfying some of the short term demand from Southern QLD feedlots.
Western Australia has shouldered a lot of the workload of feeding east coast livestock for the last 12 months. As a result, the industry is now well versed in the shipment from grain from west to east and despite a significantly smaller crop (about 2 million tonne lower according to ABARES) there still remains a healthy surplus and WA grain will continue to make its way into the east coast ration.
One thing that is without doubt the same as last year, as it is every year, the weather gods could ultimately provide an input that may very well change the dynamic. Nobody wants the Bureau of Meteorology to be right in their seemingly unwavering sentiment of a ‘drier than average’ outlook, but taking a bet on that happening could eventually reward the patient seller.
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