COMMODITY UPDATE
Market Observations: February

With the 2024/25 harvest largely finished, we now have a clearer understanding of the quality available to the industry for the coming year. The season has produced diverse results, primarily due to frosts in various areas and undesirable harvesting conditions caused by intermittent rain in Victoria. The Vic Mallee yielded an average crop at best, but other areas of Victoria achieved quality closer to what farmers had aimed for.

As an industry, we face the challenge of navigating the plethora of varying grades. Low test weights, low falling numbers (primarily in the Wimmera and Central areas of Victoria), and weed seeds in samples at storage and handling sites were not uncommon. A portion of the Western District crop was harvested with high moisture content, as was the case last year. The GTA standard is 12.5%, but many farmers had to exceed this just to get the crop off. In the Western District, the prevalence of weed seeds seen in the 2023/24 crop did not repeat this season. However, the 2024/25 Western District harvest was below its high average due to less-than-ideal growing conditions and rain just prior to the commencement of harvest. The crop also struggled earlier in the season due to late sowing and frost events.

Sporadic rain events during harvest in the Central and Western parts of Victoria caused issues, including a decline in falling numbers in wheat. Any barley that had achieved malting standards was largely downgraded to feed grade.

Despite these challenges, the overall national crop was considered a success. Queensland and New South Wales, unlike the 2023/24 harvest, were deemed successful. While not as large as the 2022/23 season, varying estimates place the Australian wheat crop at an average of 30–32 million tonnes. Higher protein levels were also observed in cereal crops, particularly in parts of Victoria and the Riverina.

The Western Australian crop was significant once again, producing more protein than usual, similar to last year. Traditional ASW and APW grades were replaced by a larger AH2 component in silos. Last year, the higher AH2 volume in Western Australia compensated for the lack of protein in traditional growing areas of New South Wales and Queensland. This allowed Western Australia to focus on sales into Southeast Asian markets typically served by East Coast Australia. This year, East Coast ports are likely to resume high-protein sales into their traditional markets, particularly for grades such as APH2.

South Australian crops, unfortunately, did not meet the yield levels seen last year. The southeast of South Australia experienced a late sowing program, similar to its Victorian counterparts, due to the lack of a meaningful autumn break. This setback had lasting effects, and the crops never fully recovered. East Coast production tonnages indicated by some market commentators seem unlikely. Parts of Victoria, South Australia, and New South Wales have produced wheat (and barley) that is light, directly affecting overall crop yield. With wheat expected to test in the high 70s kg/hl, the industry has already seen a significant amount of wheat testing in the low 70s kg/hl come to market. While the volume of grain produced is undoubtedly above average, achieving enough weight in the national wheat crop to push it closer to the mid-30 million tonnes mark seems unlikely.

Markets have been subdued over the past couple of weeks. Growers have focused on packing up equipment (or completing harvest in the Vic Western District) after a long and arduous season due to rain delays. Grain buyers have largely met their needs for now. As a result, the market is expected to remain slightly softer, with limited trading volume. However, prices are being supported by the softer AUD. Markets will naturally fluctuate based on the eagerness of sellers or buyers to engage at any given time. We are approaching basis levels where Australia becomes an attractive option for buyers in our traditional export markets compared to competitors from other origins.

With reduced exports in Victoria this year compared to recent years, road and rail logistics infrastructure will not face the same challenges seen in 2022 and 2023. Unlike previous years, when all ports were busy moving abundant crops, freight will be more readily available. This will greatly assist farmers in transporting their product to their chosen marketing locations within the desired contract periods without disruption.

The Australian domestic market will remain a consistent buyer month in, month out, regardless of how competitive we are against other growing nations. We look forward to servicing our domestic clients again in 2025.

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Author

Justin Fay
Commodity Manager