Grain Snippet: Harvest Pressure Hits Wheat
Over the past month, the SA and VIC markets have been under pressure, mainly driven by softening basis as the wheat harvest is well underway and a strengthening Aussie dollar. Since mid-November, both Adelaide and Portland APW1 track prices have declined by about $9/MT.
Back in November, the wheat harvest was delayed due to untimely rainfall across southeastern Australia. With relatively low grower selling liquidity, exporters were required to attach higher prices to secure wheat for early vessels and meet delivery obligations, lending support to the market. Entering December, weather conditions have been generally favourable, and the wheat harvest has ramped up as selling pressure hits prices. With exporters now getting coverage for their early positions, local basis has declined, further pressuring the SA and VIC markets. Since mid-November, the Adelaide basis is down 8 USc/bu, while the Portland basis is down 7 USc/bu.
Although the rainfall in November improved wheat yields, there has been a relative increase in screenings and weed seed counts grade this season. Test weight has also been a problem for some, albeit not as bad as in 2022/23. Overall, the latest ABARES report forecasts South Australia wheat production at 4.7 MMT, up 0.5 MMT month-on-month and up 2 MMT from the extremely dry 2024/25 season. Meanwhile, Victoria wheat production is forecast at 4.0 MMT, a minor adjustment from last month’s report and up 0.5 MMT y/y. At the national level, Australian wheat production is forecast at 35.6 MMT, the third-largest production on record.
The Aussie dollar has also been one of the drivers pressuring the South Australian and Victorian markets. Over the past month, the Aussie dollar has strengthened from 65.4c to 66.5c, leading to a decline of around $5/MT in the wheat market. This move has been partly driven by the RBA’s hawkish monetary stance amid relatively high Australian inflation data.
Heavy global wheat supply continues to pressure the broader wheat market. The latest world agricultural supply and demand report forecasts wheat production for major exporters at 428.3 MMT, an 8.7 MMT upward revision from last month. This lifts total production by 40.2MMT from last year. Following this revision, the stocks-to-use ratio for major exporters has been adjusted to 17.65%, the highest since 2018. This indicates that the global wheat balance sheet remains well within surplus, which continues to cap upside potential in the Australian wheat market. A meaningful rally would require a significant supply shock; however, there is currently no clear catalyst on the horizon.
On the demand side, according to the WASDE report, Australian wheat export demand is forecast at 27 MMT, up 3.3 MMT year-on-year and 1.7 MMT above the five-year average. Despite this increase, Australian wheat supply is sufficient to offset the rise in demand. As a result, 2025/26 Australian wheat ending stocks are anticipated to increase by 1 MMT year-on-year.
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