Australian wheat stocks will, in a sign of the tightness in world supplies, shrink to a 25-year low despite the country reaping a “near-record” harvest, as the country’s exports flourish, in particular to Asian buyers.
Abares, the official agriculture bureau which on Tuesday downgraded to 1.51m tonnes its forecast for domestic wheat stocks at the close of 2022-23, confirmed to GrainPriceNews that this would leave carryout inventories at their smallest in a quarter of a century.
“If realised, the forecast closing stocks for 2022-23 of 1.5m tonnes would be the lowest number since 1997,” the bureau told GrainPriceNews.
The prospect of such a dwindling in inventories comes even amid growing hopes for the forthcoming harvest, which the bureau upgraded by 1.88m tonnes to 32.23m tonnes, promoting it to the country’s second largest on record.
“Crops have excellent yield potential heading into spring following a strong start to the winter cropping season in most cropping regions and above-average winter rainfall, particularly in eastern states,” the bureau said.
However, the bureau too lifted its assessment of Australia’s export performance, pegging shipments for 2022-23 on a July-to-June basis at 25.8m tonnes” – a figure which although “slightly below the record level of exports in 2021-22 of 26m tonnes… is almost 50% above the 10-year average”.
“Demand for competitively priced wheat is strong… especially from price-sensitive markets in Africa, the Middle East and South East Asia,” with Australia being able to exploit a freight advantage to regional buyers.
“In the context of high global freight costs, Australia continues to be well-placed to export into major Asian markets due to our proximity,” Abares said, noting “robust demand from China, Indonesia, the Philippines and Vietnam”.
Furthermore, in contrast to Australia’s bumper harvest prospects, “mixed conditions” had put a “limit” on supplies available from some other key exporters, Abares said.
In the US, “tight supply in hard, high-protein milling wheat markets is… expected to continue in 2022-23” after a drought-reduced hard red winter wheat harvest, while “in Argentina, dry conditions have impacted planting and early development of wheat”.
European Union wheat production “is forecast to fall in 2022-23 due to hot and dry conditions, especially in France,” with Ukraine’s crop estimated down 41% year on year thanks to disruptions caused by Russia’s invasion.
Even in Russia, where output is estimated at a record 90m tonnes, “wet conditions have delayed harvesting and adversely affected grain quality”, the bureau said.
‘Not fit for milling’
However, Abares acknowledged the potential for some setbacks to Australian wheat quality too, if the rains which have boosted yield potential persist into harvest time, and degrade the specifications of mature kernels – as in 2021.
“The increased chance of an overly wet spring may have the potential to interrupt harvest and negatively impact grain quality in some regions,” the bureau said.
“Weather damage at harvest would make affected wheat not fit for milling, leading to a quality profile similar to last year on the east coast.
“This may diminish Australia’s opportunity to capitalise on low world supply of high-quality milling wheat.”