Australian wheat prices hit record high on expectations of a 2021-22 bumper output, exports

Australia's wheat export prices reached a record high Nov. 9 amid expectations of a bumper output for a second consecutive year and promising exports for the 2021-22 marketing year (October-September).

S&P Global Platts had assessed the Australian Prime White wheat index at a record high $343.50/mt Nov. 9, up $2.50/mt from Nov. 8, while the Australian Standard White wheat index was unchanged on the day at $333.50/mt.

The APW-ASW spread has widened to $10/mt Nov. 9, from $7/mt at the start of November, as quality concerns loomed following storms across Australia's wheat belt during the harvest.

"It's frustrating that the wet weather kicked in now during crunch time, it's definitely delaying harvest a bit and obviously raises concerns on quality," a trader in Australia said.

Another trader agreed, but said it may be too early to draw conclusions on the damage to crops. Nonetheless, the wet weather has hit liquidity in both the domestic and export markets, as growers and suppliers backed off from showing offers without assessing the crop condition.

During the last month, Australia's wheat export prices have increased nearly 3% due to strong demand from China and other Southeast Asian countries, and amid a lack of competition from Russia.

Australia is likely to produce the second largest wheat crop on record at 32.6 million mt in MY 2021-22, marginally lower than last year's estimate of 33.3 million mt, according to the Australian Bureau of Agricultural and Resource Economics and Sciences.

The agency has also projected Australia to export around 23 million mt in MY 2021-22, down from 23.6 million mt the previous year.

Production seen at record levels

Australia's wheat output in MY 2021-22 is expected to hit a record 36.17 million mt, Sydney-based IKON Commodities said in a Nov. 9 report.

According to the firm, the output is likely to be 870,000 mt higher from a year ago and around 32% above the 10-year average.

Australia's bumper crop comes after farmers faced a devastating multi-year drought two years ago, which had caused a sharp slump in production.

Australia is the world's sixth-largest wheat producer and fifth-largest exporter.

IKON has pegged Australia's wheat production in MY 2020-21 at 35.3 million mt.

"Wheat production is also set to smash last year's record with growers set to harvest more than 36 million mt this year. Growers are now looking for clear skies to capture the strong quality premiums on offer in the domestic and export milling wheat markets," the firm said in its report.

The projection is in line with the forecast of another agribusiness specialist, Rabobank, which had estimated Australia's MY 2021-22 wheat output at 31.9 million mt, the second highest on record, in its latest grains outlook.

Independent crop information service provider, the Australian Crop Forecasters, projects Australia's wheat output in MY 2021-22 at 33.7 million mt, its manager James Maxwell said.

Optimism over trade

As output is expected at around bumper levels, optimism among Australian exporters of a solid crop harvest is on the rise, traders said.

Government intervention in Russia was likely to have tightened supply, while dwindling production cuts in both South and North America had bolstered demand for Australian wheat, traders added.

Rabobank has pegged Australia's wheat exports in MY 2021-22 at a record 24.5 million mt.

Australian Crop Forecasters, on the other hand, has put Australia's wheat exports in MY 2021-22 at around 21 million-22 million mt.

Australia is expected to sell more wheat to the Asia-Pacific region, particularly Indonesia and Vietnam. China, despite having imposed trade restrictions on several Australian products, had beefed up wheat imports from Australia.

During the first nine-months of MY 2020-21, China's Australian wheat purchases have increased by around 55% on the year, to over 2 million mt, traders said.