Key highlights

Harvest is now well underway in Western Australia and the northern regions of the eastern states. All indications so far suggest a bumper crop in the east and a good crop in the west. While storm activity has delayed harvest across many areas, bulk receival data from CBH in the west and Graincorp in the east, points to a strong harvest.

The Bureau of Meteorology declared La Nina in late September and the implications for the season are substantial. La Nina is generally associated with above average spring-summer rainfall in eastern and northern Australia, and conversely below average rainfall in the western Americas. The period 2010-12 saw a great improvement in Australian crop yields but also summer flooding. 2016 did not quite meet the bureau’s La Nina thresholds but still saw the biggest Australian winter crop on record. This season, we expect an Australian wheat crop around 28 million tonnes – the biggest crop since the 2016 record.

Global grain prices have surged over the last two months, reflecting yield concerns across a number of crops and growing regions. This could not be better timed for Australia, with big crops coming into export markets over the next three months. Basis had been historically high in 2018 and 2019, but has now gone well and truly into reverse. Recent indicative at-port cash prices for wheat have been in the high $200s to low $300s range, depending on grade and location. While we are a little sceptical whether global prices will stay so high, the news for Australian wheat prices is good overall.

Barley prices are another matter, reflecting China’s trade restrictions and our high dependence on that market – around 50-70% of Australia’s barley exports are usually destined for China. This has been compounded by a big Australian crop, much of which is destined to remain in storage. That said, Saudi Arabia’s  re-entry into barley markets is very welcome for exporters.