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Australian rains seen briefly hampering wheat supply chain: sources

Highlights

Rains to benefit winter crops in long run

Full impact of rains not known yet

Delays expected in export cargoes

New York — The historically high rainfall in the New South wales region of Australia during the week ended March 21 is expected to temporarily hamper wheat trade from the region, sources told S&P Global Platts.  

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 However, in the long run, the rains may benefit the soil moisture conditions for the winter planting season as seeds sown in wet soil typically have better yield prospects, sources said. 

Australia is estimated to have produced the biggest wheat crop on record in 2020–21 (October-September) as a result of favorable weather conditions, particularly in New South Wales, Victoria and South Australia, the Australian Bureau of Agricultural and Resource Economics and Sciences, or ABARES said.

Australian wheat exports in 2020-21 are forecast to more than double on the year at 21 million mt—the highest since 2016–17 and 22% above the 10-year average to 2019–20, ABARES said.

According to the sources, majority of the heaviest rainfall and flooding was seen in the east of the Great Dividing Range—mountain range along the east coast—while majority of the cropping is to the west which is leading to supply chain issues.  

Supply chain issues  

"Though the full impact of the rains won't be known for a few days, probably the largest impact the rains will have on the wheat trade is supply chain issues," said James Maxwell, manager at Australian Crop Forecasters.   

Suppliers are facing logistical challenges delivering grain from inland to domestic end users, wheat traders from the region said. 

"Main highways are blocked off so getting grains to the port of end-buyer has been a struggle. I think there will be delays in export cargoes as its impossible to load in this rain," said a trader, adding that Port Kembla and Newcastle are likely affected by the situation. 

According to Maxwell, trains have been halted, some roads are washed out or will need clearing before they become usable again while grain has been unable to get loaded onto trucks and trains during wet weather. "Ships are also unable to enter Newcastle harbor, so there are delays in loading which will cause a bunch up," he said.  

Season to date, Newcastle has exported just under 900,000 mt of wheat, or around 11% of all bulk wheat exported in Australia, Maxwell said.   

 Damage to summer crops  

Summer crops in Australia — sorghum and cotton — are currently being harvested, or are near harvest.  

"Some of these crops, particularly those close to rivers and waterways will be partially washed out, so we're expecting a bit of downgrading to sorghum and cotton production," said Maxwell.  

There will be some crops that could see a larger impact, and there is still risk of flooding around rivers.

However, on the whole, the recent heavy rainfall has been positive for cropping as the most devastated area has been outside of the cropping regions, sources said.  

Beneficial for winter planting

On the positive side, as most of the grain growing regions have avoided the devastating flooding east of the range, it is mostly a good news story for winter planting.

The heavy floods have been mostly coastal with the inland planting zones receiving rains of up to 100 mm, which has not caused any harm but rather boosted the soil moisture profile ahead of the planting window, sources said. 

"Rain is a handy problem to have rather than dryness," said a trader, adding that it is currently too wet to start planting so the farmers are likely to begin sowing from April. 

Some very early crops--mostly canola or pulses--have already been planted but there's still a couple of weeks of time for wheat and barley planting in the region, sources said.