Grain Snippet: Abundant Wheat Meets Strong Currency
Southeastern Australia’s wheat harvest is wrapping up, with recent reports indicating average-to-above-average yields. According to the latest ABARES report, 2025/26 SA wheat production is estimated at 4.7 MMT, up about 2 MMT from the previous dry season. VIC wheat production is estimated at 4.0 MMT, up 0.5 MMT year on year.
Recalling the 2025/26 season, South Australia faced several challenges, including a late seasonal break and a significant dry period from September through early October. In contrast, conditions were generally more favourable across Victoria. In November, both South Australia and Victoria received late rainfall, which lifted wheat yields but also slowed harvest progress and resulted in a relative increase in screenings and weed seed issues. Overall, southeastern wheat grades show a higher proportion of APW1 and ASW1.
The USDA forecasts Australian wheat production at 37 MMT, the second-largest crop on record. With larger Australian production and as harvest progressed, prices declined in the SA and VIC wheat cash market. In December, Outer Harbour (OH) APW1 fell by $24/MT, while Portland (PTL) APW1 declined by $10/MT.
In January to date, OH and PTL prices have fallen by a further $8/MT and $12/MT, respectively. This was mainly due to the strengthening Australian dollar to around 0.70, a level last seen in January 2023. The stronger AUD has been driven by US dollar weakness amid political uncertainty and the RBA’s hawkish monetary stance. With the RBA remaining hawkish with its recent interest rate rise amid persistent inflation, the stronger AUD continues to exert pressure on SA and VIC wheat cash markets.
The latest WASDE report forecasts major wheat exporter production at 433.9 MMT, up sharply by 45.7 MMT from last season. The 2025/26 season is also expected to mark record production for major wheat exporters. With higher production year on year, the stocks-to-use ratio for major exporters is estimated at 18.44%, up 3.4 percentage points year on year and 1.6 percentage points above the 10-year average. This indicates that the global wheat balance sheet is in surplus and that larger carryover stocks are likely into the 2026/27 season.
As the global wheat balance sheet remains burdensome, US SRW March contract prices have been in a long-term downward trend. Although an upward trend was seen in Oct–Nov due to an improved trade relationship between the US and China, the gains were erased as the southern hemisphere harvest progressed and US wheat export cancellations increased. In late January, US SRW March contract prices showed a short-term upward move, driven by US dollar weakness and concerns over dry and frost damage in key US wheat-growing regions. This increase has been supporting the Australian wheat market, and market direction now depends on the 26/27 Northern Hemisphere winter wheat conditions.
Looking at 2026/27 winter wheat conditions, parts of the US winter wheat crop have lacked snow cover, leaving crops exposed to potential frost damage; however, no significant damage has been reported so far. As of early February, the USDA reported Kansas winter wheat crop conditions (27% of US winter wheat production) at 60% GD/EX, up 10 percentage points from the same period last year. There have additionally been some frosty conditions in the Black Sea and parts of Europe. Any issues resulting from these localised conditions won’t be fully known until the crops exit dormancy.
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