Story in partnership with Advantage Grain.
Harvest 2021 will go down in the history books as 'the one that could have been', with strong yields, solid quality and good prices predicted across the country.
We were 'this close' to the finish line when the heavens opened and the 'once in a lifetime season' got washed away.
It's been an extremely challenging harvest to say the least. As we all know, over the month of November, Queensland, New South Wales, Victoria and South Australia experienced extreme weather.
Instead of warm sunny days to finish the predicted banner crops, November pulled out all the wrong stops from hail to excessive rainfall and flooding.
Overall, parts of South Australia experienced 100mm over the average rainfall with parts of New South Wales and Queensland seeing over 400mm above the monthly average causing harvest delays, quality downgrades and in some cases complete abandonment.
This weather has led to stock feed wheat (SFW1, AGP1, and AH9) being the predominant qualities received by storage companies in affected areas.
How has the market reacted?
Being the second year of strong production in Australia, local pricing was expected to soften as harvest tonnes present for marketing.
The inclement weather has compounded this price decrease for growers in New South Wales and western South Australia, who are now faced with excessive discounts for their feed wheat, which has dropped markedly from the November highs.
The market requires time to digest the high percentage of this feed wheat and merchandise the inventory out to local and offshore consumers of feed quality wheat. As the heading says, time heals all wounds... and strong feed wheat demand from our Asian neighbours helps too!
What's the upside?
Over recent years, there has been a trend of rising demand for feed wheat. In their 2020 report, Wheat 2030: Anticipated trends in global consumption; AEGIC asserts that feed wheat demand will be a rising component of Southeast Asian markets.
They state, "given the strong growth in feed wheat use over the last decade, growth in use of feed wheat may outstrip forecast demand".
Since 2010, these local off-shore wheat markets have grown from approximately 15MMT per year to 25MMT+ per year. This trend is expected to continue and much of this market is for feed wheat.
Australian feed wheat usually fetches a premium in Southeast Asian markets due to local government regulations and our close proximity which creates a lower cost of freight versus grain from other countries.
Beyond Southeast Asia, South Korea is an important feed market as they import approximately 12MMT of corn per year.
This market does not fetch the premium seen in countries such as the Philippines, but it does form a baseline in price for Australian produced feed wheat. Australian feed wheat must compete with US corn for feed grain market share in South Korea.
The chart below shows that Australian feed wheat is now cheaper source of feed than US corn for the first time in six years. Strong demand for Australian feed wheat is coming!
What does it mean for local grain prices?
It's no secret this harvest hasn't panned out the way we'd hoped with growers in NSW and western SA suffering quality downgrades. However, feed wheat values are very well supported by strong demand from our neighbours in Southeast Asia and beyond that into South Korea presenting great marketing opportunities for feed wheat into 2022.
Advantage Grain offers low-risk pooling services for grain growers throughout Australia. With multiple post-harvest marketing options spanning two months to 10 months, multiple payment options to suit your cashflow needs and a passionate team who live and breathe grain markets, there is a program to suit all farmers.
If you're looking for an alternate grain marketing option this season that avoids harvest pricing pressure and taps into the increased feed wheat demand predicted for 2022, call the Advantage Grain team on 1300 245 586 or visit the website at www.advantagegrain.com.au.