HARVESTING may have started in a few regions, but on the whole the wheat harvest across most of Australia will be a little later than normal this year, due to the relatively wet winter and extremely mild spring to-date.
Nidera Australia’s wheat production estimate is north of 31 million tonnes, which would be a record Australian wheat crop.
Assuming a carry out of 5mt from last season and domestic demand of 8mt, Australia will have an exportable surplus of more than 28mt for the 2016-17 season.
An optimistic wheat export program for Australia for the next 12 months would be 20mt which, if achieved, would lead to a 60 per cent increase in the year-on-year carry out to about 8mt.
So let’s have a look at current grower bids versus the export market for some of the key port zones across the country as at Monday, October 10.
Bear in mind that the world has plenty of wheat at the moment and there are no foreseeable production issues across the globe.
Starting in Brisbane, the APW multigrade grower bid was about $236/t.
I am calling the FOB market US$197, which converts (after fobbing costs) to a grower bid equivalent of about $212/t – so domestic basis has plenty of work to do to become export competitive out of Qld.
In NSW and Vic, the APW multigrade bids were about $233/t at the beginning of the week.
Let’s say ocean freight is a couple of dollars more expensive out of these zones so that puts the FOB market at about US$195. This equates to a track equivalent of $217/t.
Here again domestic basis must work lower in order to find export interest as we move closer to harvest.
In the west, the APW multigrade bids were similar to east coast values at about $233/t.
The big advantage the WA grower has over the east coast is the much cheaper fobbing costs, which is reflected in a grower bid equivalent about $6 higher at $223/t.
Using the same FOB value as Brisbane puts the WA market within $10 of working into export homes.
Lastly, SA where the Port Adelaide grower bid was $221/t earlier this week.
Pencilling export interest in at US$195 FOB equates to a grower bid of about $212/t.
Like WA this is less than AU$10 above export parity on the day. But on the west coast of SA, the story is a little different.
Port Lincoln APW multigrade bids were the lowest across the country on Monday at $216/t versus export interest at about $214 (US$195 FOB). This means that domestic basis in the Port Lincoln zone has already done most of the work needed to buy export business and are best positioned to get the new crop campaign rolling.
Of course the big unknown from a wheat perspective is the profile of the crop.
Most expectations are for a much higher proportion of ASW than in most years and the export picture looks even worse from a price viewpoint.
Export demand for ASW wheat would be about $30 (US$22) lower meaning that the grade spread needs to widen across all port zones for ASW to work its way into the international marketplace.
