ASIA WHEAT JULY ROUND UP: Australian prices continue to fall, new crop prospects improve

In July, Australian wheat prices ended the month at $264/mt and $257/mt for Australian Premium White and Australian Standard White July 31, respectively, according to price assessment data from S&P Global Commodity Insights. Both prices were lower compared to $278/mt and $266/mt July 1, respectively.

Australian wheat prices eased amid persistent harvest pressure from the northern hemisphere and slow global demand. A weakening Australian dollar against the US dollar also encouraged some sellers to lower their offers. The Australian dollar had eased nearly 2% against the US dollar from July 1 to July 31.

"Exporters would find a couple of dollars if facing a customer with a bid in hand," commented a trade source based in Victoria.

While the narrative of a well-sold old crop continued in Western Australia and South Australia, market sources noted a good number of Victorian and East Coast growers were still long on old crop, which held up trade liquidity in those zones.

Rainfall had improved significantly over many cropping regions in Western Australia in July, while sufficient precipitation maintained excellent crop conditions in New South Wales and Queensland, according to trade sources. This has lifted trade estimates of national wheat production above 30 million mt, despite poor conditions in South Australia and southwest district of Victoria.

A lower-protein crop might be on the cards for Australia this season, with multiple sources pointing to the typical inverse relationship between yields and protein levels. A dry start to the growing season, particularly in Western Australia, also led to lower nitrogen fertilization rates.

"With how dry the weather was at the start of the season, growers didn't want to waste inputs. That [lower fertilization] might end up reducing the average crop protein," said a source based in Western Australia.

Asian demand steady at best

Trade activity was stronger in the late half of July compared to the beginning of the month, with the Philippines, Thailand, and South Korea tendering for third-quarter shipments, according to trade sources.

Market participants saw stable, albeit hand-to-mouth buying activity from June to July, as US and Black Sea wheat prices continued to fall following weaker futures.

Offer indications for Black Sea 11.5% milling wheat to Southeast Asia were heard in the high $260s/mt CFR SE Asia for September-to-October shipment. Meanwhile, Australian Premium White was heard to be offered around low $290s/mt CFR SE Asia for the same shipment period, sources shared.

South Korean buyers also emerged for US milling wheat following weeks of weaker US wheat futures.

Demand for Australian milling wheat, which remains outpriced by Northern hemisphere wheat, was largely restricted to Japan's regular tender.

Meanwhile, demand for containerized wheat strengthened out of Australia and the Black Sea, with sources noting that competitive prices against bulk offers and bearish views of the market had spurred some buyers to cover part of their demand with smaller-volume purchases.

Sources noted that China remained absent from the wheat import market. Its January-June imports currently stand at 9.2 million mt, leaving just 440,000 mt of imports available under the 2024 tariff-rate quota, Chinese customs data showed. While imports are expected to exceed the TRQ like in recent years, market sources believe total imports in 2024 could fall short of the 11.8 million mt seen in 2023.

To date, Australia's new crop sales to China remain thin, according to market sources. Some sources have attributed the lower buying interest to a large and good quality domestic crop in China, coupled with muted downstream demand.

"They haven't bought any new-crop Australian wheat [in bulk] this year, which is very unusual compared to previous years," said a trade source based in Australia.

Another factor could be higher imports of feed barley, as Chinese buyers flock to cheap offers from Argentina, France, Ukraine, and Russia.

Asia wheat outlook

To cement wheat production prospects above 30 million mt, Australia still needs decent rainfall in spring, given the late start across Western Australia and particularly South Australia.

Lower average protein levels are raising concerns in France, Germany, and Ukraine. If protein levels in Australia fall at the expense of higher yields, some sources fear a tightness in global milling wheat supply, particularly in mid-protein grades.

The possibility of a Turkish wheat ban extension till December and better-than-anticipated yields and quality in the Russian crop may see Russian wheat prices delivered into Southeast Asia fall further against current offers in coming months, according to market sources.