ASIA WHEAT JAN ROUNDUP: Australian harvest beats expectations on yields and quality, dominates Asian feed wheat demand

Australian wheat prices saw support from thin, albeit improving, grower selling pace and a strengthening Australian dollar toward the end of January, while pressure came from the recently concluded marketing year 2024-25 (October to September) harvest, which surpassed both yield and quality expectations among the trade.

Australia reaps bigger, better crop than initial forecasts

In January, Australian wheat prices ended the month at $257/mt and $242/mt for Australian Premium White and Australian Standard White Jan. 31, according to price assessment data from S&P Global Commodity Insights.

Indications fluctuated amid volatility in the strength of the Australian dollar, and grower selling pace gradually picked up as harvest concluded and the Australian trade returned from summer holidays.

With the conclusion of Australia's MY 2024-25 wheat harvest, trade estimates of final production figures have risen above 32 million mt, around 2 million mt higher than initial estimates at the start of the harvest, primarily tracking better-than-expected yields across most growing states.

"With the exception of South Australia, yields and even quality have generally exceeded expectations. In fact, even in South Australia, which suffered the worst weather of the lot, conditions were also not as bad as initially feared," said a trade source based in Australia.

An improvement in protein content, particularly observed in Western Australia as harvest neared its end, lent greater pressure to milling wheat export prices in January, though bullishness stemmed from a recovering Australian dollar against the US dollar. Meanwhile, healthy feed wheat demand from Southeast Asia lent support to lower-protein wheat prices, countering the impact of a large low-protein crop from Western Australia this season.

Market participants largely pointed to a return to higher mid- and low-protein wheat production this season compared to the last, though crop profiles differed substantially across different states.

"Most of the mid-protein and hard milling wheat is going to come from the East Coast, especially New South Wales," said a Melbourne-based grains trade source.

"In Western Australia, probably 60% or so of total production is lower-protein grades including ASW9 (Australian Standard White with 9% protein guarantee) and feed wheat. There is more APW than expected and probably 7%-8% hard wheat," said another Australia-based trade source.

Meanwhile, in South Australia, hard wheat was the primary grade yielded, and contrary to earlier expectations, significant screenings issues did not arise, market sources added.

Southeast Asia benefits from large Australian crop

A larger and lower overall protein crop has made Australia extremely competitive in the feed wheat space in Southeast Asia, said regional market participants.

Little competition was seen from other origins save for Brazilian feed wheat in early January, as well as US Pacific Northwest-delivered feed wheat which boasted a freight advantage to North Asian markets.

Its competitiveness also stemmed from firming corn prices in January, which saw the feed wheat-corn spread narrowing to $5/mt just before the Lunar New Year holidays.

Meanwhile, on the milling wheat front, soft freight rates and a weak Australian dollar saw more favorable delivered prices to Southeast Asia, allowing Australia to compete against other origins such as South America and Canada.

In particular, good volumes of Australian Hard and Australian Prime Hard wheat production from the East Coast posed stiff competition against Canadian Western Red Spring wheat in the region, with the lower protein in the Australian grades more than made up for by a $5-$10/mt CFR difference and lower moisture.

Flour millers in North Asia, however, have lamented the lower protein content in the Australian Noodle Wheat crop this season. "The ANW1 (Australia Noodle Wheat No. 1) ratio is very low this year. The Ministry of Agriculture, Forestry and Fisheries will meet with AEGIC (the Australian Export Grains Innovation Centre) soon and it is possible they will reduce the protein level for Japan's noodle wheat blend (ASWJ), but nothing is guaranteed yet," noted a source in the Japanese flour milling industry.

Meanwhile, Chinese demand for imported wheat continues to be a sore spot, with several cargo diversions heard for Australian Hard, Premium, and Standard White grades, according to multiple trade sources.

"The market has already priced that [the diversions] in and it's difficult to see further bearishness in prices for now," added an Australia-based trade source.

While cancellations for Canadian wheat shipments were not heard, China reportedly requested delays in several shipments, which was confirmed by another trade source with knowledge of the matter.

For now, all eyes are on US President Donald Trump's proposed tariffs on Canadian, Mexican, and Chinese imports and their impact on global wheat prices.

Though wheat exports into Asia are unlikely to be directly impacted by ongoing trade tensions, wheat millers in Asia have shared concerns over volatile currency exchange rates stemming from US trade wars, which would complicate procurement and squeeze profit margins.

"We are closely watching China's decision now and what further countermeasures they could introduce in response to the US' tariffs," said a grains trader.

What's next in Asian wheat markets?

As offer liquidity improves for new-crop wheat out of Europe and the Black Sea, market sources are now observing its competitiveness against Australian product for Q3 shipments, particularly for feed wheat.

While China has not announced any tariff measures on grains and oilseeds imports from the US, market participants are wary of knock-on impacts from existing trade tensions, particularly through volatile currency exchange rates.