Australian wheat stocks to be significantly higher than last year

Australian wheat stockpiles at the end of the season are likely to be significantly higher than last year, analysts and traders say, putting pressure on prices due to lower Chinese imports and competition from Russia, a major exporter.

A fire sale of stored grain may be needed to make room for the new wheat harvest in the last quarter of the year, putting pressure on benchmark Chicago futures, which are already trading near their lowest since 2020 due to ample global supply.

Australia shipped just 546,000 metric tonnes of wheat to China between October and March, the first six months of the marketing season, compared with 2.9 million tonnes in the first six months of the 2023/24 season and 4.4 million tonnes in the same period in 2022/23, Australian Customs data show.

Supplies from Russia, the world’s largest wheat exporter, also remain strong, despite the second quarter typically being a lean season.

The northern hemisphere wheat harvest, including in Russia, is set to begin in the coming weeks, bringing cheap grain to the market and limiting Australia’s export prospects, said Vitor Pistoia, an analyst at Rabobank in Sydney.

“If the current pace of Australian exports continues, we will have 5-6 million tonnes of carryover from last season,” he said.

“We are creating a huge problem. It doesn’t look like the global market is undersupplied,” he said, adding that this could lead to a massive sell-off in grain that could push prices to A$300 ($194) a tonne, up from A$325-$350 currently.

The total carryover, including grain from previous seasons, could be as high as 8 million tonnes, a source at an Australia-based international grain trader said.

“If the new season crop looks good, it could be a problem for storage. It would force people to sell cheaper for export to make room,” the source said.

Over the past five years, Australia’s end-of-season wheat stocks have averaged 3.3 million tonnes, according to the U.S. Department of Agriculture. “Four million tonnes is comfortable,” the source said.

“Above 6 million is difficult.”

Analysts expect Australia to produce 28-34 million tonnes of wheat this year. That’s down from 34.1 million tonnes last year but well above the 10-year average of 27.6 million tonnes, according to government data.

Chinese buyers ordered four or five 55,000-tonne shipments of Australian wheat in early May, but those are the only new Chinese purchases this calendar year and no more have followed.

In China, where key wheat growing regions have been experiencing hot and dry weather, rain is likely in those areas on Tuesday, which could further reduce demand for imported wheat. Russia, meanwhile, continues to ship grain at competitive prices even in the off-season, says one grain trader in Singapore.

“We had hoped to see more cargoes of Australian wheat reaching destinations in the Middle East and Africa,” he said. “There was an expectation that Russia would export less.”

Tags: Australia, wheat