Latest News - Advantage Grain

Weather: Dry Pattern Driving Early Season Risk Premium

Thu, 16 Apr 2026 04:31:21 GMT

16 April 2026

Seasonal conditions across Northern growing regions continue to deteriorate. Large parts of Northern NSW and Southern QLD experienced below average rainfall through late summer and early autumn, and there is no meaningful improvement in the current forecasts.

The Bureau of Meteorology’s most recent long-range outlook continues to point to a drier and warmer than average pattern across Eastern Australia. All major global models, including the BOM, continue to show rapid warming across the tropical Pacific over coming months. Neutral ENSO conditions are expected to persist through late autumn, before a speedy transition into an El Niño phase by mid-winter.

Source: https://cpc.ncep.noaa.gov/products/analysis_monitoring/enso/roni/probabilities.php

Rainfall - chance of above median for May to July.
Source: https://www.bom.gov.au/climate/outlooks/#/rainfall/median/seasonal/0

The dry weather pattern is now clearly being reflected in the paddock, with soil moisture profiles becoming depleted in the North East as we move deeper into the 2026/27 planting window. The market has responded accordingly, with a sharp rally in domestic bids across both wheat and barley in northern zones for both old and new crop.

Southern markets have followed the north higher, albeit at a more measured pace. South Australia and Western Australia and parts of Victoria have benefited from solid rainfall to start 2026 and currently have a solid soil moisture profile heading into sowing.

Domestic logistics and consumer drawing arcs will remain the key focus for northern markets in the near term, as exports out of Northern NSW and QLD are effectively priced out of new demand. The premiums being built into northern values are now doing the job of incentivising grain movements and gradually extending draw arcs into southern zones. Similar conditions were seen through the 2018/19 season, when a significant production deficit in the northeast resulted in grain being drawn from South Australia and Western Australia, with material volumes moved via road, rail and sea into Queensland to meet feedlot demand. That inter-state flow ultimately reset domestic price relationships and opened WA and SA up as the supply source into northern feed markets alongside traditional export programs. We are not at that point yet and the season has time to improve and restore balance, but the supply chain is in place and will respond quickly if the season continues to deteriorate.

The Global Picture

The latest update from the USDA has painted a neutral to bearish tone on global supplies.

Global feed grain production was revised slightly higher, with gains in South Africa, Russia and the EU. Demand also lifted modestly, led by feed use, resulting in a small increase in ending stocks and a broadly comfortable supply outlook. Argentina remains one to watch, with a wide 15 million tonne gap between USDA and Rosario corn production estimates.

In wheat, supply changes were minor, however a sharp reduction in India’s domestic consumption lifted global stocks to multi-year highs. Much of this sits within India and China and is unlikely to impact export flows unless the Indian market builds a large export program.

Attention is turning to spring weather in the northern hemispher. Russian conditions have improved following solid winter snowfall, although earlier dryness and the need for timely spring rains mean some production risk remains. Similarly in the US, HRW conditions across the US Southern Plains are varied, with parts of the central and southern belt still carrying a moisture deficit despite some recent improvements. SRW areas are in better shape overall, with adequate soil moisture across much of the Midwest supporting a solid start to spring growth, although there are still a few drier pockets to watch.

Globally, growers are facing a similar set of challenges to those in Australia. Elevated input costs, particularly fuel and fertiliser, continue to pressure margins even with supportive grain prices. Producers in key exporting regions are being forced into more disciplined decision making, with a greater focus on input efficiency, crop mix and overall risk. This is likely to influence planting intentions, particularly in higher cost or lower yielding areas. As a result, if global grain balance sheets tighten, the market may need to incentivise prodution through a boost to prices and margins.

The Overall Washup

Dry weather across northern Australia is driving early season risk premium and strengthening local pricing, while global markets remain suitably supplied. Producers are dealing with elevated input costs, keeping margins under pressure both locally and abroad, reinforcing the importance of decision making both when the crop goes in and when the crop gets sold.

While the season still has time to improve in Australia, current weather models alongside continued global conflicts, suggest volatility will remain elevated with opportunities likely to arise for growers and pool managers who are proactive in managing both production and pricing risk respectively. As always, if you need assistance with grain marketing, please contact your local Advantage representative or call head office on 1300 245 586. Fingers crossed for some rain and diesel and best of luck for the season ahead.

Input Cost Shocks

Mon, 16 Mar 2026 05:09:24 GMT

16 March 2026

The conflict in the Middle East through the first weeks of March has reintroduced a high degree of volatility across global energy and fertiliser markets, reminding agricultural supply chains how quickly geopolitical events can influence the cost of key farm inputs. Australia’s heavy reliance on imported energy will be a hotbed discussion topic for the future, however for the here and now we will examine the potential real impacts on Australian farming businesses in the near term.

In particular, diesel and nitrogen fertiliser have both experienced sharp price increases as production and logistics constraints in key exporting nations is translated into Australian pricing. As a pool manager at Advantage Grain, it is imperative to be fully aware of all costs associated with each trade. Whether it be BHC costs, logistics costs or financing costs. However, cost of production and sensitivity to input changes is something that is sometimes overlooked by grain buyers (growers are more than aware). The below report focuses on a sensitivity model to show the impacts outsized price swings have on a per tonne basis for the average Australian grower.

Diesel: The unavoidable operating cost

Diesel sits at the centre of almost every farming operation. From seeding and spraying through to harvest and grain carting, it is one of the few inputs that cannot easily be substituted or deferred when conditions demand action. Storage and longer-term supply agreements are becoming more common to give growers limited price risk management, however for the most part growers are exposed to market fluctuations.

Across a typical Australian wheat program, diesel consumption generally falls in the range of 55–80 litres per hectare [1] (L/ha) once seeding, spraying, fertiliser spreading, harvesting and in-field logistics are included. Using a midpoint of roughly 70 L/ha, a $1/L increase in diesel equates to an additional $70/ha in operating costs.

Converted to a production cost per tonne, the impact varies significantly depending on yield:

Low rainfall zones (≈2 t/ha): ~$35/MT
Average production regions (≈3 t/ha): ~$23/MT
High yielding regions (≈5 t/ha): ~$14/MT

Nitrogen: balancing cost and yield

Nitrogen fertiliser is typically the largest single input in wheat production. For this analysis, consider a representative program of 140 kg/ha urea applied for nitrogen.

Using a baseline price $800/MT for urea, this program equates to roughly $187/ha.

If urea rises to $1,200/MT, fertiliser costs increase to approximately $243/ha — an uplift of around $56/ha.

Expressed per tonne:

2 t/ha: +$28/MT
3 t/ha: +$19/MT
5 t/ha: +$11/MT

These lofty prices will of course lead to demand destruction and growers seeking alternative sources of nitrogen. Assuming a 20% reduction in urea application lowers costs to roughly $209/ha, narrowing the net increase to around $22/ha.

Beyond the Farm Gate

Further down the supply chain the costs are lesser but still meaningful, rail transport typically consumes around 0.7 litres of diesel per tonne of grain on an average sized train doing a 300km journey, meaning a $1/L move in diesel prices lifts rail freight by roughly $0.70/MT.

Road freight is more sensitive with much more drastic consequences, averaging around 3.5–4.0 L/t. Under the same diesel scenario, this would lift road freight costs by approximately $3–4/MT.

The overall impacts of these ballooning freight costs will be felt in the market at all levels; the road freight dropping a load to the local silo or feedlot, or the panamax taking 60,000MT of Australia’s finest to one of our global customers.

Implications for the Global Grower

As it stands, this input shock is both meaningful and when combined, these inputs could lift wheat production costs by A$18–46/MT across many Australian regions, particularly in lower rainfall areas at a time when growers are already operating very close to or below cost of production. These cost pressures are not unique to Australia, with global growers facing the same pressures.

The other side of this equation is grain pricing. When fertiliser and fuel costs rise sharply, the marginal hectare in many producing regions can quickly become uneconomic. In these situations growers will reduce planted area, switch into lower input crops, or simply avoid pushing production on less productive ground. While these decisions occur farm by farm, the cumulative effect across major exporting regions can lead to a meaningful contraction in global acreage and production. Even modest reductions in planted area can tighten the global balance sheet, and then it is the job of the market to ration stocks, push prices higher and incentivise production.

Australian growers are among the most capable and resilient in global ag. Input price volatility is never welcome, but it is also not new. The industry has navigated far more challenging cycles before; droughts, floods, fires, pandemics and global financial shocks to name a few. We hope the conflict in the Middle East can come to a swift end so growers can focus on the more important things (planting crops and Sydney Swans winning a flag). Good luck to all over the next weeks with your inputs and fingers crossed for some more rain.

[1] Diesel burn rate estimates are based on studies published by Grains Research & Development Corporation (GRDC), NSW Department of Primary Industries, Agriculture Victoria, Department of Primary Industries and Regional Development.

Growers face challenging conditions

Tue, 17 Feb 2026 02:35:37 GMT

17 February 2026

Global grain markets are in the doldrums with high levels of wheat stocks in the world. This is exacerbated by high input costs and an uncertain weather forecast from the Bureau of Meteorology last week. However, there are bright spots. Canola pricing remains strong and Chinese demand for barley is very good. Longer term, there are signals that global producers will be pulling back on production.

World Agricultural Supply and Demand – February 10th, 2026

Last week the USDA updated their supply and demand estimates. It served to reinforce the problematic tale that world wheat stocks are high. Global ending stocks for wheat were estimated at 277.51 million metric tonne (MMT). This is up approximately 20MMT from the prior year and explains the current low global pricing. However, low pricing has incentivised buyers to act. USDA estimated global wheat consumption to also increase for the current year by 22MMT from the prior year. So, people and animals are chewing through the supply.

High Input costs are taking their toll on producers

ABARES estimates that input costs for farmers will rise by 5% in 2026. This is across fert, chem, labour, insurance and fuel. In an article dated February 5th, The Weekly Times quoted urea at $800 – 820 a tonne at port. Although down from the COVID-19 highs, it is still much higher than pre-pandemic pricing. Producers are feeling the pinch. As a consequence, large amounts of grain are not coming to market and is instead being sold slowly and in smaller parcels. This isn’t just an Australian phenomenon but a global one. US corn growers have been reluctant sellers as has Black Sea and European producers of wheat.

Mother Nature holds the weather cards

The Bureau of Meteorology updated their long-range forecasts on Thursday, February 12th. They stated that “autumn rainfall is likely to be below average for most of the southern two-thirds of Australia”.

This outlook may or may not come to fruition. However, what is known is that current soil moisture levels are well below average for much of New South Wales and Victoria, and rainfall is desperately required to get back on track for planting season. This weather outlook is further reducing producers’ willingness to market grain while we wait for the season to play out.

Canola and Barley are bright spots

Canola is a commodity not currently at multi-year price lows. Strong demand from the European biodiesel industry coupled with hopes for a re-opening of the Chinese markets has supported canola this year. Nationally, the GM variety still carries a large discount as most of Western Australia’s production is now GM varieties. Hopefully, the Chinese market can improve GM pricing over time.

China has been a consistent buyer of Australian feed barley this year. Since November of 2025 there has already been over 4MMT of barley exported by bulk out of Australia. If we include current stem bookings and container exports this number balloons to 6MMT. Good demand with prices close to where ASW1 wheat is trading.

Outlook

As mentioned earlier, there are signs that global seeding will decline this year in the northern hemisphere. Anecdotal reports are that there will be less acreage in the Black Sea and the United States this season. Also, industry reports that forward bookings for fertiliser are dramatically down from this time last year in Europe. All signs point to production declining this year.

As usual, mother nature will have the final say on what global wheat production will be this year… and she can be cruel.

2026 – The Year of the Horse

Fri, 02 Jan 2026 03:56:50 GMT

2 January 2026 

Over the course of 2025 we observed a bear trend in market pricing as both Aussie and global production outlooks improved from April through July. The drought in South Australia and to a lesser extent Victoria broke at the same time Russian and US weather improved. Grain markets are now at a soft level not seen since before the pandemic while many inputs and the overall cost of doing business is up. These are challenging times for many producers, but there are bright spots.

As we kick off the new year, let’s take a look at the major weather patterns, what the current predictions are, and how global grain pricing influences are affecting the market outlook for early 2026.

5 La Nina’s in 6 Years

Australia has experienced five La Nina’s in the last six years. This has led to generally wetter conditions across much of the east coast of Australia, albeit with periods of dryness in the southeast of Australia. Although the drought of 2024-25 in South Australia was the state’s worst in 20 years, on the aggregate, Australian winter crop production has been strong over this period.

Looking forward, the Bureau of Meteorology forecasts much of Australia to have equal chances of being wetter or dryer than average over January to March 2026. The northern tropical areas could be wetter while there is a risk of dryness in parts of Western Australia. The El Niño Southern Oscillation (ENSO) and Indian Ocean Dipole (IOD) are the primary drivers of this forecast.

El Niño Southern Oscillation (ENSO)

Trade wind strength and cloud patterns have been indicative of La Niña since September 2025 and as of January 1st, weak La Niña conditions remain in place. This is compounded by unusually warm sea surface temperatures to the east of Australia. As a result, January is likely to be wetter than average for northern Australia. In fact, we are already seeing this with flooding in Northern Queensland causing a disaster for impacted graziers. La Niña conditions in the sea surface temperatures are predicted to dissipate over January through March and may trigger a corresponding drop in the probability of higher-than-average rainfall as Australia edges into its 2026 sowing period.

Indian Ocean Dipole (IOD)

The Indian Ocean Dipole measures the difference in sea surface temperatures in the Indian Ocean between the northwest of Western Australia and the waters off the eastern coast of Africa. When warmer waters form on the eastern side of the Indian Ocean, closer to Australia, this is called a negative IOD and increases the chances for weather patterns to sweep across Australia from the west to southeast. The IOD has recently been in a negative phase but has now entered a neutral phase which will decrease the probability of rainfall coming from the west.

Global grain pricing influences

China

The USDA estimates that both corn and wheat are in supply drawdown presently in China, who has been a prolific buyer of Aussie barley this season. We can expect this demand to continue. China has also recently purchased Aussie canola on a test basis. If successful, this renewed market would create support for canola beyond the biodiesel processing markets in Europe. China continues to buy Australian wheat, but the volumes do not surpass normal buying patterns so far. At these levels of commodity price vs cost of production, it is possible we will see China come in for larger purchases of all agricultural commodities for their stockpiles.

Wheat

The global wheat market currently sits in a well-supplied position. However, at current prices it is expected that plantings will decline in 2026 globally. We are already seeing this in Russia with winter wheat plantings down and the USDA estimates American producers to do the same.

Politics

Over the last five years, we have seen a steep increase in global conflict and the war in Ukraine continues into its fourth year. Although the Ukrainians have proven to be resilient and entrepreneurial, this supply chain is under pressure with ongoing drone and rocket attacks. Any further escalation will lead to increased volatility in global wheat markets.

Weather

Over the past 18 months, we have not seen a serious supply disruption in any of the major producing regions globally. In an age of more volatile weather events, we may be overdue. This was after a period between 2021 and 2023 where droughts were suffered in Canada, Kansas, Europe, Argentina and parts of the Black Sea. As usual, mother nature is in charge here and she can be cruel.

Financial volatility and the investor class

During the final months of 2025, we have seen record surges in the price of gold and silver. In the case of gold, it is due to global reserve banks diversifying away from US treasuries. For silver, an increase in demand is expected for usage in data centers. These rallies far exceeded initial estimates when the investor class came into the market. If we were to see production issues in agriculture and/or a sharp jump in demand the same would happen in agriculture markets.

How can Advantage Grain help growers navigate these markets?

The start of a new year is often a time to review and set plans for the year ahead. With weather uncertainty leading into the 2026 sowing period and the predicted ongoing volatility among global grain pricing influences, having structure in your grain marketing approach could provide real benefit to your farming operation.

Advantage Grain offers structured wheat, barley and canola marketing programs that are low cost, low risk and low stress. The programs allow farmers to focus on what they love and do best – farming, while Advantage Grain handles the volatility.

At a time when every dollar counts – it is good to have the Advantage Grain marketing team in your corner.

For assistance with any grain marketing requirements please call your local Advantage Grain representative on the details below.

QLD and NSW: Jack Craig 0474 845 782
SA and VIC: David Long on 0427 012 273 or David Evans on 0437 176 280

Advantage Grain launches new grain marketing product to increase grower returns

Mon, 08 Dec 2025 03:32:34 GMT

8 December 2025

As the southern harvest moves into full swing, Advantage Grain is introducing a new nine-month sales program, Advantage 9, to its stable of grain marketing products to reduce farmer costs and help boost their overall returns.

Advantage Grain’s General Manager Chris Nikolaou said Advantage 9 will run from January through to September, selling an equal portion of grain each month over the nine-month period.

This new product will replace the existing 10-month structured program, Advantage 10.

"The move to introduce the nine-month sales program this season will help growers avoid the higher storage and handling fees that kick in from the month of October each year," Mr Nikolaou said.

“As we all know, the costs producers are facing have risen in the last five years.

“We have analysed the performance of the 10-month program over several years, and have found that narrowing the program length by one month to reduce supply chain costs will provide growers a better overall return.

"Additionally, if they have chosen the monthly payment option, they will secure a higher monthly payment throughout the year."

To help buck the trend of higher costs across the board for growers, Mr Nikolaou also confirmed that management fees for all Advantage programs will stay the same as they have since 2020.

“Growers who wish to partake in a 10-month grain marketing program will continue to have that option through our Custom product,” he added.

According to Mr Nikolaou, long term grain marketing programs can provide farmers many benefits in the right season.

This can include the potential to capture pricing rallies in the middle of the year caused by the Northern Hemisphere growing season, as well as local rallies in August and September before the Australian crop takes shape and the market is more confident in the predicted final production numbers.

Traditionally a domestic focused grain marketer, Advantage Grain began expanding its grain marketing into overseas markets in 2023.

“The company’s foray into the grain export market in 2023 marked a significant milestone for the company,” Mr Nikolaou said.

“We have continued to build on that capacity with two export vessels executed during this marketing season.

“Generating value for our customers is at the core of everything we do, and adding export to our tool belt when the numbers add up assists us to provide that value.

“We are extremely pleased to have the capacity to generate more value and reduce costs for growers when opportunities arise.”

For more information on Advantage Grain’s sales programs, visit advantagegrain.com.au or call the team on 1300 245 586.

About Advantage Grain

Previously run under the banner of Agfarm from 2008 until 2019, Advantage Grain’s best price averaging structured grain sales programs have partnered with farmers to market their wheat, barley and canola for nearly two decades.

There are multiple programs to choose from, including a two-month, five-month, and now a nine-month program, which all commence selling grain in January. The company also offers a post-harvest four-month program, which sells an equal portion of grain each month between March and June, as well as a custom program that allows growers to be involved in the marketing by setting which months they wish to sell their grain, while still gaining the benefits of the company’s best price averaging sales strategy, access to buyers and administrative support.

All programs offer an advance, monthly and deferred payment option, allowing growers to choose a payment method that complements their farm business cashflow throughout the year.

ENDS

Media contact

Stephanie Buller

E: s.buller@advantagegrain.com.au

M: 0447486934

Aussie harvest rolls south while US data gap comes to an end.

Fri, 14 Nov 2025 05:35:29 GMT

Rowan Fessey, 14 November 2025

2025 -26 Harvest Progress

Harvest has kicked off across most grain-growing regions, with progress varying across the country. Queensland (QLD) and Northern New South Wales (NSW) harvest is generally on schedule to slightly ahead with the southern growing areas lagging behind with showers and cool weather slowing things down.

QLD and Northern NSW moved through the bulk of their wheat and barley programs earlier than usual thanks to a warm, dry September that accelerated maturity. Yields from these northern areas have been mixed but largely in line with grower expectations after the dry finish—wheat proteins have been strong, screenings manageable.

In Western Australia (WA), harvest has shifted into full gear after patchy showers initially delayed starts. Growers have reported variability paddock to paddock however overall, canola yields in some early-stripped paddocks have surprised on the upside, early barley yields in Geraldton and northern Kwinana are coming in positively, while early yields on wheat look good while still being a low protein ASW year.

South Australia (SA) has also begun to pick up momentum, though the state remains roughly a fortnight behind where it typically would be for mid-November. Early yields from the Upper Eyre Peninsula (EP) and Mallee districts have been modest, reflecting a dry seasonal finish and a limited soil-moisture profile heading into Spring. Better results are expected from the lower EP, Mid North and South East where crops held on slightly longer and received the late October rainfall.

Laharum Victoria

Mundulla SA

Victoria (VIC) and Southern NSW are the last major regions to get fully underway, with many growers waiting out cooler, damp conditions through the first half of November. While delays have been frustrating, the milder finish may yet help grain fill in some later-sown crops, particularly in the Wimmera and Western District.

Nationally, the theme is variability, delays and persistence! Canola oil content is holding up well and barley is indicating good malt potential in southern zones. Wheat proteins have been higher than average in the drier northern and western regions, though southern protein levels are expected to sit closer to long-term averages with the cool slower finish.

As headers continue to roll south, the market is preparing for a steady lift in supply pressure, though not being overwhelmed with tonnes due to the slower progress.

Canola harvest NSW.

October Rainfall

Much like the Bureau of Meteorology’s updated website, Spring rainfall was disappointing.

Rainfall patterns across Australia were highly variable and forecasts didn’t quite hit the mark for a lot of growers. Some regions scored a much-needed late moisture boost while leaving others to contend with an already dry finish. Eastern states fared best, particularly parts of Eastern NSW and VIC where several systems delivered regular top-ups. These falls helped stabilise later-sown wheat, barley and canola, and in some cases added valuable weight to grain still in the fill stage. Southwest VIC and pockets of Southeast SA experienced one of their wetter Octobers in recent years, which improved prospects after a challenging start.

Later planted crops in SA will benefit from the patchy storms that blew over in October and early November. Vegetation health indexes across SA and VIC indicated healthy crop growth through spring and great potential, so the late storms should finish these crops off nicely. Barley and canola may not benefit as greatly.

Overall, October rainfall did not drastically shift production prospects for the national crop. SA and VIC production should improve vs previous estimates, while NSW will likely shrink slightly. WA production could see records broken for another year on the trot which is a great result for our friends in the west.

US government shutdown – nearing the finish

The US government shutdown in October created a notable ripple effect across global grain markets by halting the regular release of USDA reports, including the critical WASDE, crop progress updates and weekly export sales data. For several weeks, traders were left without the usual reference points that guide global sentiment and balance-sheet assumptions. This lack of transparency introduced a risk-premium element into markets, particularly for soybeans, wheat and corn, where fund positioning often relies heavily on official US data.

The data gap coincided with the Trump/Xi trade discussions where frameworks for ag product purchasing volumes were discussed. The absence of weekly export sales figures meant the market could only infer buying volumes based on private-sector rumours, tweets and vessel line-ups, adding to uncertainty and occasional intraday volatility. Wheat markets also saw moments of support as rumours circulated of additional Chinese interest, although firm confirmation was limited.

With an end to the shutdown within reach, government functions will resume, and markets will need to digest a 10 course meal of data. The release of the WASDE on Friday night Australian time (14/11/2025) will kick off the data dump, with the resumption of regular reports to follow. The question on a lot of market participants lips is the extent of China buying, if at all.

The WASDE should also indicate a global balance sheet without any production holes or supply shocks that are needed to drive pricing higher. Global wheat buyers are comfortable, with ample supply coming online out of Argentina and Australia. The Southern Hemisphere wheat grower has outperformed in the 2025/26 season.

In a lower price year, any upticks in pricing are important to capitalise on.

While Advantage Grain’s pooling programs don’t pick the highs and the lows of the market, they do return the best price average over the period, meaning you will see benefit from the highs when they occur, without the risk of selling the lows.

For assistance with any grain marketing requirements please call your local Advantage Grain representative on the details below.

QLD and NSW: Jack Craig 0474 845 782
SA and VIC: David Long on 0427 012 273 or David Evans on 0437 176 280

Australian Production Outlook Continues to Improve

Wed, 17 Sep 2025 01:58:49 GMT

Chris Nikolaou, 17 September 2025

The outlook for Australian wheat production is improving after what was a late and difficult start for many. Local grain prices are reflecting this improvement. Meanwhile, the global wheat market has softened after initial concerns over the Russian wheat harvest. Stateside, a near perfect growing season for corn has been spoiled by an extremely dry August and September taking the top off the record crop.

Australian wheat production outlook

After a challenging 2024 for many in Southern NSW, VIC and SA, the first half of 2025 did not fair much better. It was not until late May that many producers in VIC and SA received their autumn break. However, since that point in time conditions have continued to improve with current vegetation health indexes for most of the country scoring high. However, there are parts of southern NSW and the Mallee through both SA and VIC that continue to do it tough. In their September crop update ABARES stated the “national winter crop production to increase by 2% in 2025-‍26 to 62 million tonnes, the third largest crop on record”. They explained that most regions had received timely rainfall and pegged the upcoming harvest for wheat at 33.8 million metric tonnes (MMT) which would be a great outcome if achieved.

However, spring weather will set final yields and the next six weeks are important. The current outlook is for a neutral to dry back half of September before seeing rains return in early October. There is also concern that a wet harvest could impact grain quality.

Russian harvest improves after a slow start

Russian wheat values rallied $20 per metric tonne in July and August as initial harvest yields disappointed. This was a boon for Australia as local exporters reported an increase in demand for nearby wheat, business that usually went to the Black Sea exporters. However, as harvest has progressed into the northern areas that were less drought affected, yields have improved and prices have come back down. Local analysts are calling for a national crop of 87MMT which is up slightly from last season. On a side note, there has been discussion this season on the toll the war in Ukraine has taken on the Agricultural industry in Russia. Both labour and imported parts are hard to come by. Also, the war economy has led to extreme inflation and local interest rates have been set at over 20% to taper it back. However, the impact for Russian growers is that they cannot afford to borrow funds to finance their farms. They have done well with timely rains to produce the crop this season, but the war and its economic issues will continue to take a toll on the industry as long as it continues.

Banner US corn crop goes backwards

After a dry start to the year, US and Canadian weather also improved from May forward. Rainfall was so widespread and abundant that the USDA pegged a record yield in their August supply and demand reports. However, it now appears this was too early for much of the corn belt. From August forward rainfall has been extremely sparse with areas under drought conditions expanding and the expected yield is dropping. The graphic below is from Iowa State University and measure rainfall for the period against 130 years of historical data. You can see the northern and central plains have faired well. However, much of the central and eastern corn belt is facing a scoring in the bottom of the last 130 years of rainfall data.

Effects on local pricing

Wheat prices have declined locally as the expectation for this coming season’s crop have improved over the last three months. However, we are not out of the woods yet as the most important part of the season is upon us for yield development. If it goes the other way and we are too wet, quality concerns can be expected, particularly in Northern NSW and QLD. Globally, supply is there for now, but the Russian industry has structural issues and the US corn crop is going backwards. Current prices are not great but there is the potential for an improvement in the months to come.

As harvest edges closer and global grain pricing influencers continue to fluctuate, now is a good time to think about your grain marketing strategy and cashflow needs for harvest. Advantage Grain’s best price averaging grain pools offer three payment options; advance, monthly and deferred, to meet your cashflow needs during harvest, and throughout the season. For more information on our marketing programs or a discussion on your marketing strategy for the season, visit advantagegrain.com.au or give the team a call on 1300 245 586 .

Changing Patterns Building Confidence

Thu, 14 Aug 2025 22:51:36 GMT

Rowan Fessey, 15 August 2025

Australian 2025-26 production prospects are building momentum with regular constructive weather patterns working their way across the country through July.

The driest regions of South Australia finally received a well earned drink which will stabilise and grow new crop yields.

Looking ahead to the Australian spring, the Indian Ocean Dipole (IOD) is currently neutral, but nearby forecasts show values dipping below the negative threshold, with the latest weekly index at -0.84 °C for the week ending August 10, 2025. A negative IOD is increasingly likely to develop, as sea surface temperatures indicate warmer waters in the Eastern tropical Indian Ocean and cooler in the west. Forecasts from international models, including the Bureau of Meteorology (BOM), predict a negative IOD phase persisting through most of Spring 2025, before returning to neutral in early summer. This aligns with the typical IOD cycle, where events peak between August and October and decay with the monsoon arrival by late spring.

A negative IOD generally brings above-average rainfall to southern Australia during winter and spring, as warmer waters off northwest Australia supply more moisture to weather systems. The wetter patterns through winter so far are a positive sign for a wetter than average spring (touch wood!).

On the back of improving winter rainfall, the production outlook for Australian wheat, barley, and canola remains positive. The latest ABARES Report (June 2025) for the 2025-26 season, has wheat production forecast at 30.6 million metric tonnes (MMT) alongside the USDA estimate at 31MMT. Private analysts estimate range from 31-34MMT which reflects the improvements seen throughout July and hopefully with above average spring rainfall, the national crop can continue to expand.

Corn Acreage Pops

The August 2025 USDA World Agricultural Supply and Demand Estimates (WASDE) report surprised the market with a drastically improved US corn production outlook for the 2025 crop, driven by favourable weather conditions and increased planted acreage. Planted area is estimated at 97.254 million acres, up 5% from 2024. With an all-time high average yield of 188.8 bushels per acre, benefiting from timely rains and mild temperatures. Total production is projected at a record 461.75MMT, a 13% increase over 2024's 417.49MMT.

The unexpected surge in corn production immediately added weight to the corn market and wider feed complex with corn contracts selling off aggressively. Cheaper and more readily available US corn will displace other feed sources into destination markets. The impact on the Australian market will be added competition for Australian lower quality feed wheats, ASW and barley into Asian markets and further abroad.

Geopolitical Challenges Creating Opportunity

This week China accused Canada of dumping canola, alleging that government subsidies enabled unfairly low prices that hurt China’s domestic industry. As a result, China imposed preliminary anti-dumping duties of 75.8% on Canadian canola imports, effective August 14, 2025, escalating a trade dispute sparked by Canada’s tariffs on Chinese electric vehicles in 2024. The duties led to a sharp drop in ICE canola futures, threatening Canada’s C$5 billion canola export market to China, with Canadian officials rejecting the claims and vowing to support farmers while seeking alternative markets. While not an exact case of déjà vu, it’s all too familiar for Australian barley growers who endured the same treatment between 2020 and 2023. However, in the current circumstances, Australian growers should benefit from the halting of Canada-China canola flows. The move creates an opportunity for Australia to regain access to the Chinese canola market, with test cargoes expected this year after a trade freeze since 2020, primarily due to Chinese restrictions aimed at preventing fungal plant disease spread. Importantly, China is also a large consumer of GM Canola, which has struggled to find strong export demand out of Australia in recent years with widening spreads to Non-GM canola emerging.

What does it all mean?

As Australia heads into spring with strengthening rainfall prospects, the national grain outlook is shaping up to deliver solid production results across key crops. International market shifts and geopolitical tensions are adding both challenges and opportunities for growers, making strategic marketing more important than ever. Advantage Grain is here to help growers navigate these dynamics and make the most of their grain marketing opportunities come harvest.

Improving Global Crop Outlook and Growing Biofuel Demand

Thu, 17 Jul 2025 04:09:01 GMT

Rowan Fessey, 17 July 2025

Global grain markets are entering the crucial northern hemisphere weather period where crops are made and broken. So far, major grain producing regions in the Black Sea are on the mend, corn production in the US is going from strength to strength and the Australian 2025-26 crop outlook is improving.

Oilseeds in the Energy Transition

The latest World Agricultural Supply and Demand Estimates (WASDE) report highlights a significant trend shift in U.S. oilseed usage, with soybean oil for biofuel production surpassing its use for human consumption for the first time. According to the July 2025 WASDE report, U.S. soybean oil usage for biofuels is projected to reach 15.5 billion pounds for the 2025/26 marketing year, a 12% increase from the previous month's forecast and a 23% surge over the three-year average. This shift, driven by recent EPA mandates and tax credits, indicates that 53% of soybean oil usage in the U.S. will be dedicated to biofuels, reflecting strong demand from the renewable energy sector, supporting soybean prices and the wider oilseed complex. The growing role of oilseeds in the energy transition is an important and ongoing theme for the global oilseeds market. Australian canola growers should feel the tailwinds of these shifts as more US production is absorbed domestically, and the traditional global consumer feels a tightening in the oilseed market.

Improving Weather: Aus and Abroad

Improving weather across Western Australia and South Australia has bolstered the new crop production outlook and given growers confidence to progress or finalise old season grain sales. Favourable rainfall and milder temperatures in these key growing regions, has improved crop prospects for winter crops. After a dry start to the season, a shift in southern weather patterns have led to more consistent precipitation through June supporting crop development. Even with rainfall through June and July, a significant portion of the WA, SA and VIC growing belt is still well below seasonal averages.

The latest Primary Industries and Regions South Australia (PIRSA) crop estimates for the 2025/26 season project improved production compared to earlier forecasts. PIRSA’s June 2025 report estimates South Australia’s wheat production at 5.8 million metric tonnes (MMT), up 7% from the March 2025 estimate of 5.4MMT, driven by better-than-expected rainfall. Barley production is also revised upward to 2.1MMT, a 5% increase from the previous 2.0MMT.

In the U.S, improving weather conditions are boosting production potential for corn and soybeans. The USDA’s July 2025 WASDE report forecasts a record-breaking U.S. corn crop of 15.82 billion bushels with an average yield of 181 bushels per acre, supported by favourable rainfall and moderate temperatures across the Midwest. Private analysts are even more optimistic about corn production, with many coming in well above the USDA forecast. Soybean production is estimated at 4.34 billion bushels, with yields benefiting from timely rains in key states like Iowa and Illinois.

Russia’s wheat crop is also benefiting from improved weather, adding weight to the global balance sheet for the back end of 2025. After earlier drought concerns, recent rainfall and cooler temperatures in key wheat-producing regions like Rostov and Krasnodar has replenished moisture levels and is finishing the crop off. The July 2025 WASDE report has recognised these improvements by increasing their estimate of Russia’s wheat output to 83.0MMT for the 2025/26 season. Another solid Russian wheat crop takes some of the pressure off the global balance sheet with the worlds go to low-cost supplier replenishing supplies.

What does it mean?

Australian wheat pricing will need to maintain competitiveness on the global market against restocked and improving Russian and US supplies to close out the 2025 calendar year and beyond into new crop. The positive weather outlook and overall improving production prospects in Australia will give growers, consumers and exporters more confidence over the coming months. Volatility throughout the northern hemisphere spring and into Australian harvest is common, particularly in this highly charged geopolitical environment.

Global grain values tread water as weather threats subside

Tue, 17 Jun 2025 23:41:40 GMT

Chris Nikolaou, 18 June 2025

Over the last four weeks, we have seen much needed rain in the southeast of Australia which will help freshly sown crops to germinate. While this rain was well received, more favourable rainfall is needed and unfortunately, the Aussie weather outlook continues to push the best forecasts further out.

Globally, weather models had predicted ongoing dryness in both the US and Russia but this has not eventuated the way it was forecast.

These local and global weather influences are keeping grain values treading water and leaving the market poised for reaction.

Aussie rainfall

Over the last four weeks QLD and northern NSW have continued to receive quality amounts of rainfall. Many growers we speak with in these areas are pleased with the early season rainfall. However, the same cannot be said for southern growers. SA and VIC have both been struggling with long term drought affects. Since the start of the year southern NSW has also suffered from a deficit of rainfall. At the end of May/start of June the pattern changed for the southeast with all three states receiving rainfall. This will go a long way to getting sown crops started. However, much more is needed to return the southeast of the country to a ‘normal season’. Consequently, local basis levels declined with the improving outlook. If we do not see solid follow up rain or an overall change in the weather patterns, one would expect the market to start pricing in weather concerns in July. Currently, the outlook for June is for sub-average rainfall for many parts of Australia.

Northern Hemisphere seasons on the mend after a very poor start

Going into the northern hemisphere spring, both the US and Russia were under drought in much of their wheat growing areas. However, in late April the weather patterns for both producers changed. Widespread rainfall throughout the US mended key growing areas in Kansas, Oklahoma and Texas. Their harvest is starting up now and the expectation is for large crops.

Russia also has experienced a rebound in weather after suffering through drought for much of 2024. However, the last 90 days rainfall anomaly shows that not all areas have experienced this good fortune.

The Rostov region of Russia continues to be declared under drought emergency and excessive spring frosts. The USDA report last week estimated total Russian wheat production at 84 million metric tonne. However, many private analysts are lower than this.

Australian and global outlook

Locally, the BOM continues to push the best weather pattern shifts further out. They now present that the balance of June will be dryer than average for much of the country. July forward should see the best chances of overall weather improvement. Producers in the states of South Australia and Victoria have had a challenging 12 months and we hope things continue to improve.

Overall, local grain markets have seen short term local spikes in pricing based on dry conditions in the southeast. This has mostly been seen in feed barley for sheep. Global markets have been subdued with improving wheat growing weather. However, this could change at any moment with a down turn in US summer crop conditions.

Local and global market volatility can be difficult to follow, and harder to sell your grain into. This is why having Advantage Grain in your corner to watch the markets, and make informed decisions about grain sales, can draw out real benefits in your grain marketing strategy each year.

For more information on Advantage Grain and our low-risk sales programs, call the team today on 1300 245 586.

Australia enters the sowing period under dry conditions

Thu, 15 May 2025 02:57:38 GMT

Chris Nikolaou, 15 May 2025

Producers across the wheat belt of Australia are currently sowing their crops for the coming season. However, much of the country is suffering from dry conditions as a strong high-pressure system sits over much of the southern half of the country. Globally, weather conditions have improved in Russia and the United States. However, Europe is undergoing a dry spell. The USDA has updated their first version of the coming season supply and demand tables with corn coming out better than expected.

Dry start to the Australian campaign

The southeast of the country and much of the northern growing belt of WA have been under dry conditions since the start of 2025. The BOM is now categorising much of South Australia under serious drought conditions. These conditions have led to a big uptick in drought feeding for sheep in SA, VIC and parts of Southern NSW helping to drive barley prices higher. Also, the Grain Industry of Western Australia recently made a statement that new crop wheat plantings could be down by as much as 13% this year on account of poor conditions in the state’s north. This week’s WASDE estimated the new crop Australian wheat production at 31MMT which, at this stage, feels optimistic.

However, none of the longer-term weather models have called for a protracted period of dryness. The BOM’s long range forecast released May 8 ^th called for a dry May with improvement from June forward. Let’s hope this eventuates for our colleagues in SA who are doing it tough presently.

Global weather update

Big northern hemisphere wheat producers. Russia and the United States, have experienced improved fortunes over May after both regions experienced severe dryness earlier in the year. It is now unlikely we will experience a production issue in North America. However, weather can still be a factor in Russia through July. In the meantime, France and Germany have turned over drier. This may impact Australian canola prices as the EU is a key buyer for canola seed. Further afield, both India and China have experienced drier conditions on their respective wheat crops. There have been rumors over the last weeks that China could be coming back into the market for wheat re-stocking. This would be logical as their crop is currently in the grain fill stage. Also, the first port of call for Chinese wheat restocking would likely be Australia so would be a good outcome for local producers.

Global grain prices looking for their next driver

The USDA released their May 2025 World Agricultural Supply and Demand update this week. With improved fortunes for the Kansas grower, US wheat supplies are set to increase year over year. Futures have been in the process of responding to this domestic outlook for much of May. So, what drives markets next? According to the USDA, corn and soybean supplies for the coming season are forecast below pre-report expectations. With a tighter than expected balance sheet, there is no room to absorb the losses from a weather issue this US summer. Also, the global carry out for corn was estimated some 20MMT lower than the current year. Any crop issues in corn would lead to a rally in global wheat prices. It is worth noting that with the current close pricing between wheat and corn – there will be a large global increase in wheat feeding. Although it may take three to six months to be felt in the market, any demand is good demand! Overall, May has been kind to some northern hemisphere wheat producers but China and India are likely to experience production decreases. Also, the EU was expected to have a banner production which is likely now shrinking as well.

While we all hope for an improvement in Australian weather, the global market continues to be volatile and, in some instances, decreasing. With many growers so focused on their farming operation it is important to have someone in the market for you every day. The Advantage Grain sales programs provides this so that you can focus on your farming while we focus on the grain marketing.

Weather and trade tensions continue to shape ag outlook

Wed, 16 Apr 2025 08:24:25 GMT

Chris Nikolaou, 16 April 2025

Global weather continues to be volatile with improvements in both the US and Russia. The US and China face-off in a second trade war that may be beneficial to both Australian grain and livestock producers. Closer to home there is growing concern over weather outlooks in Southern NSW, Victoria and South Australia.

Northern Hemisphere Wheat

The state of Kansas has suffered from drought for nearly 12 months now. Recent improvements in local weather have seen a downshift in futures pricing and the expectation is for more rainfall. However, this will need to eventuate for the market to take comfort that conditions are improving.

Russia is the world’s largest exporter of wheat. Over the last 10 years and with much government support they have built up to approximately 25% market share of total exports. So goes Russian wheat crop, so goes global pricing. Theirs is another wheat production area that has been under drought conditions for the last year. In late March there was an improvement in rainfall that has stabilised the crop. However, the current outlook is for another dry spell.

The US crop will get made over the next six weeks so nearby weather is more important. However, the Russian crop is later and will be more sensitive to weather over May and June. Although both regions have had recent improvement; they still require monitoring.

The US-China Trade War

Since President Trump’s first term, the US and China have been in an escalating trade war. Although Trump did start this in 2018, many of the tariffs were either kept in place by President Biden or increased. This year with the new administration in place the tariffs have escalated to over 100% in both directions. This effectively cuts off any trade in goods that don’t get an exclusion negotiated.

USDA data shows that for the fiscal year 2022; the US exported over $35 billion in agricultural goods to China. The following table is sourced from the USDA website.

This trade flow is made up of $16.4B in soybeans used for animal feed, largely in pork production. $7B in corn and other feed grains for poultry and pork production. $2.7B in cotton. $2.1B in beef and beef products. $1.1B in pork. Poultry and poultry products accounted for $1.1B in exports and $750M in dairy products. With tariffs now in place and no exclusion on the horizon, market participants are expecting US ag exports to China to decrease dramatically. This is good for Australian primary producers as much of these products will need to be sourced elsewhere by Chinese buyers. The barley and sorghum markets have already seen strong China buying in the first quarter of this year.

It is worth noting, this is all with the backdrop of an ongoing conflict in Ukraine where both sides have dug in, frustrating the new US administration’s attempts to broker a peace deal.

Australia enters the sowing period

The south east of Australia has been doing it tough over the last twelve months. In particular, Eastern South Australia and Western Victoria. Both regions finished the 2024 production campaign with lower than average yields due to poor rainfall. In fact, some parts of SA had the worst season in over 20 years. Fast forward 6 months and the local dry is now spreading with much of SA, VIC and southern NSW in extremely dry conditions. Rainfall is needed but the current outlook is not promising.

The Bureau of Meteorology, in their update dated April 10 ^th , called for a drier than normal April and May before normalising in June and turning over wet.

We hope for a more positive start to the season than this for all producers currently facing poor conditions.

What does it mean?
Northern hemisphere major wheat producers are experiencing volatile conditions as their season progresses which may lead to changes in market prices as we go along. The US-China trade war has escalated beyond any point in the last seven years and will likely offer opportunities for Australian producers to increase their market share of Chinese buying across a range of primary products. Finally, local weather is challenging growers’ patience in the South East of the country. It is imperative we see an improvement in weather in this part of the country. Overall, politics and weather continue to create volatility for grain and oilseed markets. The former will likely offer opportunities for Australian producers while the latter is up to Mother Nature.

Weather, politics and resilience

Tue, 18 Mar 2025 04:28:46 GMT

In spite of volatile politics and challenging weather, Aussie growers are showing they can do more with less.

Chris Nikolaou, 18 March 2025

Australian grain prices have increased since the start of the year. This has been led by weather concerns off-shore and uncertainty over restrictive trade policy. Weather concerns continue to persist in both the US and Russian wheat growing regions. Also, US tariffs and Russian export restrictions have buyers seeking alternative options. Both situations bode well for good Australian wheat demand. Locally, ABARES recently raised national winter wheat production to 34.1 million metric tonnes (MMT). A great outcome considering the challenges of the season for many.

Weather

Russian wheat growing areas have been under some form of drought for the last 12 months. Currently, local analysts are predicting another low year of production due to decreased acres as a consequence of poor access to seed, inputs and labour. Although there was no serious winterkill event this season, a lack of winter rains may exacerbate this set up if spring rains do not perform. Ukraine has also had lower than normal rainfall over the last 90 days.

Unfortunately, southern, central and northern plains wheat growers of the United States are not experiencing much better weather for the start of their spring campaign. Associated Press reported on March 17 ^th , that severe dust storms and wildfires were raging across much of Oklahoma and Texas impacting both croppers and livestock.

The US drought monitor shows that much of the northern plains is in moderate to severe drought. The south east of the country is experiencing even worse conditions as extreme and exceptional drought spread north and east from Mexico. The US Drought Monitor ranks drought in the following categories: D0 – abnormally dry, D1 – Moderate Drought, D2 – Severe Drought, D3 – Extreme Drought, D4 – Exceptional Drought.

A substantial pattern change will be required to avoid these drought conditions worsening at a time when winter wheat is exiting dormancy. March, April and May are the key periods for US winter wheat where moisture requirements will increase. This is presently not a good setup for spring.

Barriers to Trade

Russia has implemented a wheat export tax over the last several years to slow exports and dampen domestic inflation which is tracking at over 20% presently. Furthermore, late last year the government announced a plan to reduce export quotas by 50% for the first half of 2025 as they wait to see how the growing season performs for their new crop. The impact of this is to push demand to other producing origins such as Australia.

The Current US administration has implemented widespread tariffs in an effort to resolve a perceived unfairness in trade. At present, there is no evidence this will work and is more likely to add further costs into their own supply chain for US based producers and consumers. Whether this strategy works for them in the long term remains to be seen. In the short term, consumers will seek alternatives without trade barriers in place.

Export Pace

The start of the marketing season this year was dominated by exports of canola and pulses. Barley has also had a stronger than expected export pace this year. However, those programs are slowing down now which should free up room for wheat to take the lead. Logistical improvements combined with barriers to trade from the governments of other producing countries should see wheat exports improve.

ABARES update

The government statistics agency lifted Australian wheat production by 2.1MMT in their recent update to a national total of 34.1MMT. The states of Western Australia and New South Wales saw the increases. This is a strong outcome considering most regions experienced protracted periods of dryness or frost events (or both) during the last growing season. This shows the resilience and productivity of Australian producers. However, it is important to point out that many regions did not experience the required finishing weather and we hope their weather improves this autumn.

What does it all mean?

The normal weather-induced volatility one expects from the agricultural commodity markets is now exasperated by political intervention in multiple major countries. The price chart at the beginning of this report shows a $20 per metric tonne range in Australian wheat prices just in the first two and half months of the year. We expect this volatility to continue over the second quarter of 2025 as the northern hemisphere works through their weather issues in a key growing period. In the medium to longer term, global buyers will continue to “Buy Australian” as they can deal with a nation with less government intervention and more economic certainty.

The Advantage pooling programs help growers take the stress, guesswork and volatility out of grain marketing with a low risk structured marketing program. In volatile times such as this, a little less stress and risk is a good thing for everyone.

Strong performance from wheat to start 2025

Wed, 19 Feb 2025 03:52:48 GMT

Chris Nikolaou, 18 February 2025

Since the start of the year, global wheat prices have risen. The benchmark contract for Chicago wheat futures is up 16% over the last six weeks. Russian values for 12.5% protein wheat have risen and we are starting to see this flow through to Australia with local values also on the rise. What has driven this improvement in pricing?

Russian Ag

In a world-grain.com article dated January 1st, 2025 they estimated that the Russian winter grain harvest could be the worst in 23 years. They cite ongoing drought over 2024 has being a major catalyst. However, their woes are deeper than weather driven impacts to production.

The war with Ukraine has impacted many parts of the Russian Ag industry. Trade sanctions against Russia and retaliatory against trading partners have limited the ability of Russian famers to access higher quality seed, equipment and machinery from off-shore. Also, the import quotas that did exist were limited to a few companies, leading to price gouging for these inputs.

The world-grain.com article went on to state “the Russian Central Bank’s decision to jack up the key interest rate to 21% during the recent board meeting in October 2024 made commercial loans virtually unaffordable for Russian farmers”. This response to high inflation has led to a situation where Russian purchases of new harvesters and tractors is down significantly as the costs of capital is too high. With declining farm profitability, “farmers cut the use of fertilizers, and plant protection agents and switched to cheaper, lower-quality seeds”.

Finally, the Russian agriculture sector is suffering from a shortage of labour. Rural businesses are competing with employers in the cities at a time when there has been a huge recruitment drive by the armed forces. “The labour shortage is projected to get worse. Each year, the Russian population in the 20-65 age group shrinks by about 1 million”.

Supply and Demand

Overall, the southern hemisphere has finished off the harvest season with above average production. The February 2025 World Agricultural Supply and Demand (WASDE) update showed Argentina’s production up by 2MMT year over year to 17.5MMT and Aussie up 6MMT to 32MMT. To a certain degree this has masked the issues plaguing Russia. However, the Russian ag ministry has dramatically lowered the countries wheat export quota. In an article for graincentral.com on December 3rd, 2024, local industry senior manager Peter McMeekin states that “a wheat export quota of 11 million tonnes for the second part of the marketing year 15 February to 30 June 2025 would be down from 29 million tonnes in the same period for 2024” ( https://www.graincentral.com/markets/russia-announces-wheat-export-quota/ ). This bodes very well for Australian producers as global importers will need to shift more of their purchases to Australia.

However, the WASDE also decreased Chinese wheat imports to 8MMT which is down from 13.6MMT last season. This is a headwind for global markets. However, it would be very bullish for global wheat pricing if China were to change tact and import higher volumes of wheat. Watch this space.

Weather Outlook

Two of the largest northern hemisphere wheat producers face uncertain outlooks. Russia has an industry falling into disrepair plus ongoing drought through some of its ag regions. Also, the US faces an uncertain weather outlook. Currently, Mexico has experienced an ongoing drought for most of the last two years. There is concern that this could spread north and east into the southern plains during the US spring.

Summary

We have enjoyed a price increase in wheat since the start of the year in spite of larger Aussie and Argentinian harvests. This has been more than offset by reduction of Russian supply for the first half of 2025. Over the next few months, Australia should enjoy a very strong demand which bodes well for local pricing. However, high levels of volatility will remain as the market watches to see how Mother Nature treats North America and the Black Sea production regions this coming year.

If you’re still holding grain from harvest, Advantage Grain’s 4 month structured sales program remains open for transfers. This program sells an equal portion of your grain each month from March until June, returning you the best price average over the period. For further information on Advantage Grain’s 4 month sales program – watch the video below or call the team on 1300 245 586 .

Is this the season to pool your grain?

Mon, 06 Jan 2025 03:01:37 GMT

6 January 2025

With market volatility likely to continue throughout 2025, a current low-price market and a large Aussie crop now almost completely in the bin, could this be the season to pool a portion of your grain?

Throughout 2024, Australian growers saw a trend of general bearishness in the grain markets, with brief periods of extreme volatility.

Over the month of May, for example, the wheat market rallied by 20% as it became apparent the Russian crop was in decline.

However, Advantage Grain General Manager, Chris Nikolaou, says 2025 is shaping up to be better for growers.

“A shortfall in oilseeds in Europe has boosted canola prices over the last three months,” he said.

“Ongoing dryness in Mexico and recent dryness in Argentina, along with Russia decreasing its export quota for 2025, may provide the turnaround grain markets need in 2025.

“However, it is difficult to predict the incoming US administration and what their policies will be towards the Ukraine war and with tariffs on China.

“We see green shoots, a turnaround from the current low prices, but foresee continued volatility due to politics and weather.”

Locally, the current pricing reflects the reality of a national wheat crop of 32.5 million metric tonnes coming to market over the harvest period.

The lower AUD is making exports competitive and a decreased Russian export quota for the first half of this year will limit the competition for Australian grain exports.

It is also expected that there will be strong demand for Australian wheat, which could bode well for pricing over the coming months.

The combination of these domestic and international market drivers could provide perfect conditions for long term grain sales strategies that grain pools provide, to extract more value from the 2024 harvest.

Chris said Advantage Grain’s best price averaging sales programs are designed for this type of market volatility.

“We have seen favourable results over the past few years in a similar market environment, particularly with downgraded grain,” he said.

“We have a team in the market every day searching for the best prices and intricately following market drivers so growers can see the benefits of the potential increased return, without the stress and 24/7 market vigilance involved.

“The pool acts like a managed fund. We pool all the grain together, like a managed fund pools money, then manage that grain portfolio in its entirety, giving farmers access to larger markets, managing the relationships with buyers, both domestic and export, providing counter party insurance and more.

“We are essentially another business function that growers can outsource to an expert, the same way they use an agronomist to look after the health of their grain, or a mechanic to fix their machinery.

“We look after the grain marketing and all the administration work that comes with it, and we pay on time, every time, so growers can get back to farming, knowing their grain marketing is being taken care of.”

Advantage Grain’s wheat, barley and canola pools sell an equal portion of grain over a two, four, five or 10-month time period and provide the best price average return back to farmers who pool with them.

All programs offer three payment options; advance, monthly and deferred, and are closing for transfers on Friday 24 January 2025.

For more information on the Advantage Grain programs, or to see their historical returns, you can visit their website advantagegrain.com.au or call 1300 245 586.

ENDS

Media contact

Stephanie Buller

E: s.buller@advantagegrain.com.au

M: 0447486934

Grain Market outlook for 2025

Sun, 05 Jan 2025 23:39:06 GMT

Chris Nikolaou, 6 January 2025

For the majority of 2024, agricultural markets experienced a bearish market globally. However, there may be change on the horizon. Russian exports have peaked for the current season and local estimates are for lower production in the upcoming season. A lower Australian Dollar is assisting by making our grain values more affordable to off-shore buyers. Mexico continues to experience drought in key corn growing regions and Argentina has turned over to a dry spell to start the new year.

Australian Production finishes strong outside the southern states

QLD, NSW and WA have outperformed expectations this year after periods of dryness and frost events. However, VIC and, in particular, SA have not been so lucky. Growers are reporting in some parts of SA they received their lowest in-season rainfall in 100 years! This poor weather in the south has taken its toll, and production is down almost 50% on last season. However, the national wheat production figure is expected to come in at a respectable 32.5 million metric tonne (MMT) for wheat, buoyed by strong production in the book-ends of WA, NSW and QLD.

Local pricing has been soft on account of a decent overall national production figure. However, Australia is currently priced competitively and should see strong demand for exports.

Australian Dollar drops

Since the end of September, the AUD has fallen over 10%. This is due to two reasons. One, expectations for the United States to increase their budget deficit with the planned tax cuts by the incoming administration. Also, a tariff war would weigh heavily on the Chinese economy who is Australia’s largest trading partner. Therefore, the outlook for the AUD was significantly reduced once the market digested the impacts of the policies after the US election. We expect the trend of a lower AUD will continue if these policies come to fruition.

This makes Australian ag products cheaper to overseas buyers and we expect to see strong demand for Australian, wheat, barley and canola as a consequence.

Mexico endures two year drought

The current Mexican drought commenced in late 2022 leading to national water usage restrictions. They experienced a short term rainfall reprieve in the 3 ^rd quarter of 2024 but the dry is now building again. Local production of corn has been reduced, and imports were up 5MMT in 2024. Currently, long range models are calling for this weather pattern to continue and for the drought to worsen during 2025.

There is also a risk that this drought “moves” north into the southern states of the United States and impacts US wheat production in the northern hemisphere spring.

South American production faces second production threat this season

Brazil experienced one of its driest Septembers on record in 2024. However, when the monsoon weather commenced in October, the skies opened and never really closed. In the end, 2024 ended with the expectation that South America would have a banner oilseed and corn crop which has cast a bearish shadow over ag markets. But over the last fortnight, Argentina has experienced drier than normal weather. As of the date of writing, their forecast is for an extremely dry two week outlook. Although soil moisture is good, 4 weeks of continuous dry weather will begin to take its toll. Also, the dry outlook is spreading into southern Brazil. If this weather pattern continues into the latter half of January, markets will rally to price the smaller than initially thought South American supplies. This would have knock on effects for wheat, barley and canola.

Russia sets restrictive wheat export quota for the First half of 2025

2024 saw challenging weather for Russian wheat production. A dry period earlier in the year cut current season production back to approximately 83MMT. However, some timely rains helped to avert disaster. For the balance of the year, dryness continued and the sowing campaign is believed to have been down 3% from last year due to this. Local commentators are saying that this coming year’s wheat crop could be in the worst condition in 10 years.

Where there is smoke there is fire.

In early December, the Russian authorities decreased their allowed export quota to 11MMT for the period February through June of 2025. This is down 10MMT from 2024 and is very good for Australian wheat demand over what is a key exporting period for us. It is also worth noting that monitoring Russian spring weather will be important from March forward as any further weather stress will compound what has occurred over the last 12 months.

What does it all mean?

As usual, grain market volatility will continue. Weather will play the major hand but also a heightened geopolitical landscape including war in the Black Sea and an incoming administration in the US that could commence a trade war with the world’s second largest economy.

Advantage Grain offers growers a professionally managed grain marketing service. We have a team of pool managers in the market every single day monitoring both global and local markets in the endeavour to return the best possible grain pricing to growers.

We do the grain marketing so you can focus on the grain production.

For more information on Advantage Grain’s best price averaging grain pools, visit advantagegrain.com.au or speak to the team on the details below.

QLD and NSW: Jack Craig 0474 845 782
SA and VIC: David Long on 0427 012 273 or David Evans on 0437 176 280

The more things change, the more they stay the same

Mon, 18 Nov 2024 02:43:53 GMT

Chris Nikolaou, 18 November 2024

The Advantage programs have concluded for the 2023/24 season with the last of the sales programs completed in October. September saw a rebound in pricing for both domestic and international markets due to dry weather in Australia, Russia, the United States and South America. Over October we saw improvements in many of these global producing regions and a late rain event in the Southeast of Australia was viewed as somewhat positive. The Australian harvest is approximately 30% complete with many growers focused on marketing canola and pulses. Overall, the price outlook is positive for wheat pricing in the new year as the Russian Ag Ministry could be in the process of reducing their export quotas for the second half of their marketing year.

Global weather improves over October into November

The southern plains of the United States have been battling drought, on and off, for over two years now. However, in late October and early November a pattern change brought much needed rainfall to some of the most parched areas of the wheat belt.

US futures have responded by dropping back to lows not seen since the end of northern hemisphere harvest in August. The South American monsoon was late to arrive this year. This weather pattern usually kicks off late September but did not arrive until mid-October and is now in full form. The market’s fears for Brazilian beans and corn have subdued while the monsoon remains in place.

Australian Update

Most growing regions of Australia experienced an unusually dry September. This exasperated the problem for those hardest hit by this season’s dry in SA and VIC. A mid-October late rain event through the southeast is seen by growers in southern NSW and VIC as beneficial, but unfortunately, too late for growers in SA.

At the date of writing, the national harvest is approximately 30% complete. Oilseeds and pulse harvest is almost complete, with growers starting to switch their focus from harvesting these commodities to marketing them. The northern areas of NSW and WA are coming in slightly better than expected in terms of yield, but the market is waiting for results in the frost and dry affected areas of southern NSW, VIC and SA.

From a marketing perspective, Australia is currently seeing good demand for wheat into Asia. Exporters are reporting active buying from Malaysia, Indonesia, Philippines and Thailand. Also, it has been reported that China was in buying Australian wheat a fortnight ago.

Russian rumours on export quotas for exporters

Russia has experienced a dryer than normal 2024. Initially, this impacted the current season production earlier in the year. Production was reduced by some 9MMT in 2024 vs 2023. Timely rains helped, but the overall pattern has been poor. Over the last few months, locals have sowed their winter wheat program which is currently tracking at approximately a million less hectares from a year ago. There has been talk that the Russian Ag Ministry will seek to restrict exports over Q1 – Q2 of 2025 due to the production and seeding issues they have faced this year. If the current weather pattern stays in place, this will be more likely. Any restrictions set for the first half of the year will be very good for Australian prices as global buyers will also be faced with declining stocks in the EU and Ukraine.

What does it all mean for Australian grain prices?

Global markets have softened as major production areas receive rain after periods of dryness. However, Russia, the world’s largest wheat exporter is still dryer than normal and more likely to restrict exports if this weather pattern stays in place. Australian harvest is now in full effect and over the coming weeks we will better understand the damage caused by frost and dryness. As the title of this article suggests, the more things change, the more they stay the same. Grain market volatility looks set to continue as we continue through the Australian harvest and throughout the next marketing year. Utilising Advantage Grain’s dedicated team to manage your grain sales in a structured, low risk way, will save you time and could yield real pricing benefits in the new year as this expected price volatility plays out across the globe.

Advantage Grain would like to take this opportunity to thank all the growers throughout QLD, NSW, VIC and SA for your support over 2024 and we wish everyone a safe and bountiful harvest. May your yields be off the chart and high quality!

The La Niña that never was

Wed, 16 Oct 2024 01:16:04 GMT

Chris Nikolaou, 16 October 2024

Since May of this year, multiple meteorological services have called for a La Niña weather pattern to take hold. This has been the prediction from the National Oceanic and Atmospheric Administration in the United States to Australia’s own Bureau of Meteorology. However, it was not to occur. A season full of promise has been marred by drought in the south of the country and a widespread frost event in late September.

What is La Niña

Since May, the BOM has been continuously set to La Niña ‘watch’ as the ENSO status. The BOM defines La Niña as “the positive phase of the El Nino Southern Oscilation….it is associated with cooler than average seas surface temperatures in the central and eastern tropical Pacific Ocean” “La Niña conditions generally result in above average rainfall over much of Australia.”

In spite of these La Niña forecasts, the weather pattern has not verified yet. In fact, parts of South Australia have had less than half their average annual rainfall for the calendar year to date. Over September the dry pattern accelerated with WA, SA, VIC and parts of NSW all experiencing below average rainfall.

Late September frost event

To add insult to injury, there was multiple wide spread frost events in the second half of September this year. The events covered three states impacting southern New South Wales, Victoria and South Australia. A September 27th, 2024 article in Grain Central quoted a local Murray Mallee agronomist stating that local temperatures got to as low -8 degrees. The article went on to discuss the merits and economics of cutting crops for hay. There has been speculation that New South Wales was also hit hard by the frosts. However, there has not been the same reports of cutting crops as in South Australia.

Putting it all together

The dry September coupled with a widespread frost event has reduced the expected size of this year’s crops from what they could have been earlier in the season. ABARES is currently forecasting a national wheat crop of 31.8MMT. This would be up on last season's production but is at risk of being reduced further. Currently there are rains forecast for much of the national wheat belt. If these fail to materialise, production estimates will certainly drop again. Also, there is concern that late season rains will delay harvest and potentially lead to downgrades.

Global Update

On Friday October 11th, the Russian Ag ministry conducted a meeting with local exporters. At this meeting, it was recommended that exports should be sold at a minimum price of $250 USD Freight on Board (FOB). In the past, exporters have found ways to circumvent these “recommendations”. Alternatively, Russia can be an unsafe place for those who break government rules! Either way, the Russian price for wheat is increasing and this is good news for Aussie growers not affected by drought or frost this season.

Advantage Grain’s best price averaging wheat, barley and canola marketing programs sell an equal portion of your grain each month over a 2, 4, 5 or 10 month period. This takes the volatility and stress out of post harvest grain marketing and lets you focus on doing what you do best – farming!

For more information on Advantage Grain’s pooling programs, visit advantagegrain.com.au

Current weather drivers – what can we expect?

Fri, 13 Sep 2024 02:37:49 GMT

Oliver Fiddes, 13 September 2024

As we all know, spring is a vital season for crop development in Australia, with winter crops in the yield determination stage of growth, and weather playing a crucial role in this. As we move towards the end of the season, let’s take a look at the primary weather drivers and what we can expect to see as we edge into harvest.

There are three main systems that influence weather for Australia. These are the Southern Oscillation Index (SOI), the Indian Ocean Dipole (IOD) and the Southern Annular Mode (SAM).

Southern Oscillation Index (SOI)

What we have seen over the last 12 months is a fluctuation between an El Nino (SOI -7) and a neutral ENSO (El Nino-Southern Oscillation). This means that weather has been largely dry and unpredictable for much of Australia.

However, since mid-late August, we have seen the trade winds gain momentum between Tahiti and Darwin and with this, the SOI has moved into a weak La Nina episode (SOI +7). What this means for Australia is that we should start to see more predictability in weather patterns and more rainfall across the east coast and SA.

The Madden-Julian Oscillation, which is currently over the maritime continent, is expected to build strength in the trade winds and help a La Nina gain momentum.

Indian Ocean Dipole (IOD)

The IOD monitors the relationship between sea surface temperatures in the eastern and western areas of the Indian Ocean.

A positive phase of the IOD means less rainfall for the country, while a negative IOD means more rain for the country.

Much like the ENSO, we have largely been in a neutral state which is likely to continue until the end of the Spring with no big push wetter or drier.

Southern Annular Mode (SAM)

As we enter spring and move into summer, we can expect the SAM to begin to trend into the positive. This typically results in increased chances of rain from NSW through into Victoria and the eastern edge of SA.

Currently the SAM is positive and expected to move into neutral imminently. This means that this weather system will have a minimal effect on Australian weather. This is why we have seen less than optimal levels of rainfall for South Australia over the past few months.

Global weather

Elsewhere in the world, Brazil is facing extremely dry conditions for sowing their new crops following a dry six weeks over harvest.

Alongside this, the EU has had a poor harvest, particularly in France.

The USA has begun their corn harvest with the USDA estimating 5% of the crop has already been harvested. Tropical storm Francine is passing through the Midwest bringing rain and some potential harvest delays, however for the most part, the US is experiencing a moisture deficit to finish both the corn and soybean crops.

The local outlook

Provided this La Nina continues to build, we can expect to see more predictability in the weather systems bringing much needed rainfall to SA and other areas of the east coast. Finishing rains will be crucial in South Australia and Victoria for the national crop to achieve and outperform current near record production estimates.

Earlier this month, ABARES released the most recent Australian Crop Report for the 2024-25 winter crop harvest where it stated production is forecast to increase by 17% from last seasons harvest. If this is the case, it would be the fifth highest harvest on record.

With ongoing market volatility and the continued impacts of weather-related issues as we lead into harvest, utilising Advantage Grain’s dedicated team to manage your grain sales will save you time and could yield real pricing benefits in the new year.

Piecing together the puzzle of Aussie grain prices

Thu, 15 Aug 2024 23:59:03 GMT

Rowan Fessey 16 August 2024

WASDE

The August USDA report unveiled a few US centric surprises and some expected changes across the globe.

Corn and wheat numbers were supportive of prices with US corn cut by 800,000 acres. However, this was offset by a record estimated yield at 183 bu/acre to slightly increase overall production on the last report.

European corn production was reduced by 3.5 million tonnes with the collective EU and Black sea production reduced by 8.75 million tonnes versus last year. EU corn consumption was reduced 2.5 million tonnes overall with a shift to wheat feeding expected due to a low quality downgraded EU wheat crop on the horizon that will make its way into feed rations.

The USDA increased wheat production numbers across Australia, Ukraine and Kazakstan and made cuts to the US and Europe. Overall global wheat carry out is set to decrease slightly with increases in livestock feeding cutting into stocks.

Wheat Quality

French growers have endured the fourth wettest spring on record with rainfall up to 45% more than the 10 year average dating back to 1991, according to Meteo France. Sunshine throughout the European spring was estimated at a 20% sunshine deficit across France vs seasonal averages, limiting photosynthesis and crop development. Recent crop ratings from the French Agrimer put the French crop at 50% good to excellent, with ongoing wet harvesting conditions making progress slow. Quality levels are highly varied by region, however the national average for protein is reported to be similar to 2023.

Canadian wheat growers are working through a hot and dry finish to what was a promising crop. Conditions have tumbled in recent weeks with crop ratings falling through late July. A cooler and slightly wetter start to August has steadied conditions and should help later-seeded crops meet yield expectations. The heat stress during July has caused crop development to accelerate, resulting in crops maturing ahead of historical timelines. Even with a cooler break, crop condition ratings continue to decline slightly from the previous week. Currently, 46 per cent of crops in Alberta are in good or excellent condition, compared to the five-year average of 56 per cent. Canada’s high quality milling wheat, Canadian Western Red Spring Wheat (CWRS) is a direct competitor for Australian milling grades into many Asian markets. A poor finish to the season could support Australian milling wheat demand going forward.

AUD

The Australian dollar is an important piece of the puzzle for Australian growers to be mindful of over the coming months with key central bank monetary policy meetings on the horizon. Foreign exchange markets throughout July and early August have been highly responsive to new data prints and reactive to risk sentiment.

In mid-July, the AUD showed signs of strength climbing toward US$0.68 before selling off to lows of 0.635 which hadn’t been seen since April. The sell off was data driven initially, with soft Consumer Price Index (CPI) and Non-Farm Payroll figures in the US, then an unwinding of risk allocation in Asia creating a whirlwind sell off in equities and FX. The dip in AUD was swiftly bought up returning to 0.66 within a couple of trading sessions.

The AUD trajectory throughout August will largely hinge on how the U.S. navigates softening economic data and the expectation of September rate cuts by the Fed.

With Australian interest rates expected to remain higher for an extended period as signalled in recent RBA minutes, the AUD should remain well supported with the caveat that global risk appetites are maintained and concerns of a US recession are eased. A steep increase in the AUD will dampen our export competitiveness in the global market.

Where to from here?

As usual, commodity markets are complex with multiple drivers in play. A smaller and lower-quality crop in the EU is a positive for Australian milling wheat. Additionally, the decline in the Canadian crop potential could gradually shift demand to Australian wheat next year. However, the broader economic environment will continue to impact the value of the AUD and the terms of trade this dictates. While all this plays out over the coming months, let’s hope for a kind finish for local crops this spring.

Production swings and a tighter global balance sheet

Mon, 15 Jul 2024 23:45:33 GMT

Rowan Fessey 16 July 2024

Global agricultural commodity markets came under pressure through June with market participants becoming more comfortable with production prospects ahead of the northern hemisphere harvest along with sluggish global demand.

Black sea wheat production is on the mend according to analysts, with estimated Russian production now pegged between 82 and 84 million metric tonnes (MMT), down from 92MMT last year. This is a sizeable increase from the 78MMT estimate that was being circulated through analyst wires in May which drove the rally through May.

Headers are rolling through southern Russian fields on the border with Georgia where yields have so far surprised to the upside. Russian cash markets responded and have softened as harvest progresses north. There was a brief moment in May where it looked like Russia might lose the crown as the worlds low-cost wheat supplier to the Europeans. However with crop prospects improving and the unofficial export floor price quietly disappearing, Russian exporters have resumed their aggressive offers out to global buyers.

Russian harvest is still in its early stages and is yet to reach the key production areas in the central and southern regions. These regions account for two thirds of production and had a very tough, hot and dry finish. The year on year vegetation health index map below shows the biggest wheat producing Oblast (region) of Rostov, with significant heat vegetation stress in comparison to last year so some surprises could still be in store when the headers get rolling.

Other major wheat producing nations are also having production swings which will shape the global wheat balance sheet for the coming year. French wheat is set to be 15% lower year on year at 29.7MMT. Canadian production looks set to improve to 35MMT up from 32MMT last year, and US production is also improving with what looks like the best US wheat crop since 2019 with the July WASDE coming in at 54.66MMT, up 5.35MMT year on year.

The Australian 2024/25 season is also improving with WA receiving timely rainfall through June and early July to make up for a dry start. SA and parts of VIC are still in need of a break after only receiving patchy showers. NSW is looking in good shape for above average production.

The most significant weight on the wheat market through June has been the prospect of a large corn crop in the US. The acreage report released by the USDA in late June indicated growers had planted 600,000 more hectares than the March report. This was a larger increase than many were expecting. Although this is down on last years plantings it would still be the eighth largest corn area in the last 8 decades and has weighed heavily on markets. In the most recent USDA report this larger US corn production has been offset by increased exports which will actually result in a reduced carry out.

What does it mean for us?

The overall impact of these production swings will result in a tighter global wheat balance sheet for the coming year, with global production increases in the US, Canada and Australia not enough to offset the declines in the Black Sea. The geographical importance of the changes also needs to be acknowledged. The largest production reductions are occurring in the lower cost producing regions, with global exportable surplus shifting slightly to countries with higher cost of production. The anchor that has been cheap Russian grain in the global market may not be as heavy going forward. However, this weight on the market looks like it will be replaced by US corn, with the expected larger production likely to displace wheat in feed rations across the world.

Things to watch

The US corn crop is a long way from in the bin. The crucial pollination period through July can be impacted by excessive heat, excessive moisture and a number of other environmental factors. With an early hurricane season looming in the US we will need to keep an eye on conditions.

Fund positions also need to be monitored with near record shorts on corn contracts in the US. In the week ending July 2 ^nd 2024, the net short on CBOT corn was increased to 336,000 contracts, up from 278,000 the week prior. Nearing the all time short record of 340,000 contracts in February earlier this year. With most corn contracts now sitting near contract lows, the fund shorts will be wary of any minor production issues and aware that exiting a short of that size in an orderly fashion can be tricky.

Market volatility goes both ways

Mon, 17 Jun 2024 00:12:35 GMT

Chris Nikolaou 17 June 2024

Over the last four weeks, global grain markets have featured an extreme level of volatility due to events in Russia and Turkey. Last week’s USDA update of global supply and demand statistics has confirmed the upcoming year will be globally tight due to an extremely dry spring in Russia. However, Turkish authorities took the decision to throw cold water on the global rally by announcing a wheat import ban. Closer to home, WA has received much needed rains while calls for La Nina continue but extend further into the future.

The Russian motherland

Over the months of April and May, the Russian wheat growing belt experienced its driest spring in over 20 years.

The impact has been real with the USDA calling for a reduction of overall wheat production in the nation to 83 million metric tonnes (MMT). This is down 8.5MMT from last season’s crop and is expected to be downgraded further in upcoming reports on account of the current hot and dry weather. This same weather pattern has impacted Ukrainian production which was decreased to 19.5MMT versus last season at 23.5MMT. Global markets responded accordingly over the last two months with an aggressive rally in both futures and cash markets.

Turkey to the rescue (of their own)

“I hold the world but as the world, Gratiano, A stage where every man must play a part” So says Antonio to Gratiano in The Merchant of Venice. Last week Turkish authorities “decided to play their part” through a ban of wheat imports from June 21st through to mid-October. They went on to state the action would “prevent our producers from being affected by price decreases due to supply density during the harvest period, to meet the raw material supply required for our exports from domestic production, and to ensure market stability in favor of producers”. Turkey imports an average of 9MMT of wheat per year so this came as a strong blow to pricing. It is expected Turkey will still come to market for their normal requirements, but it will be in the back end of the marketing season. However, in the near term European and Black Sea producers and exporters are looking for import market opportunities for their freshly harvested production.

Australian focus

WA growers have faced adversity with extremely dry conditions until the last fortnight where the season has finally broken with good rains. NSW and QLD have been enjoying improving conditions while SA and western VIC producers still await their break.

Canola Update

The canola market has experienced a marked improvement of values since earlier in the year. Of all the grain and oilseeds balance sheets, canola will remain the tightest for 2024 with improved consumption in the EU, reduction of planted acres in Australia and a turn-around in global vegetable oil pricing expected for the second half of 2024. Canada has recently received widespread rainfall. However, there is not the room in the market for a supply threat later in their growing season.

Summary

Global grain and oilseed markets continue to be volatile but the medium to longer term outlook is positive for Australian producers providing we can get the right weather.

The Advantage 5 program has recently finished strongly with the May rally in prices. Growers in both the 4 and 10 programs will benefit from improved pricing conditions as well. Overall, we are pleased to see improving seasonal conditions in WA and look forward to the season breaking for SA and VIC producers.

World wheat markets rally on the threat of Russian drought

Thu, 16 May 2024 05:52:02 GMT

Chris Nikolaou 16 May 2024

Over the last four weeks we have seen an AUD $50 per metric tonne rise in wheat prices. This has largely been driven by a very dry March and April in the central growing belt of Russia. In the United States, ongoing wet weather threatens the timely plant of corn. Here is Australia, we are looking for rain to replenish soil moisture in Victoria, South Australian and West Australia.

The Russian bear bulls up wheat

Last season Russia produced approximately 90 million metric tonne (MMT) of wheat. 65% of this production is winter wheat and 35% is spring wheat. This year’s winter wheat has faced the driest April-May in 20 years. Last Friday, the USDA updated their production estimate and pulled it back to 88MMT. It now appears that further cuts will be necessary as May is turning out to be another dry month for core growing regions. Many private analysts are now at 85MMT or less. This is meaningful due to the large market share of global wheat trade Russia holds. They are the largest exporter of wheat and hold approximately 25% of the global ocean traded wheat market. They were also consistently the lowest price exporter prior to the war in Ukraine. To date, Russian producers have had the benefit of cooler than normal weather. Frost events have occurred, but they have been able to avoid the large drawdowns that occur during dry and hot periods. It is estimated that every week this pattern stays in place Russia loses 1MMT of wheat production. This number would accelerate if it were to turn over hot at any stage as well.

Overall, Russia has had a run of a number of seasons without a severe production issue. Some of this is due to government support, and some is due to the conversion to capitalism and incentivising producers to adopt better farming practices. However, a run of good luck doesn’t hurt either.

Planting delay in the United States

During sowing in the United States, government officials release a weekly crop progress report. On Monday, May 12th the report stated that corn was 49% planted vs a 10 year average of 60% complete. The delays are due to ongoing wet weather that is preventing folks from getting into the paddock. This wet and stormy weather is expected to continue for the month of May in the main corn growing regions of the Midwest. Unfortunately, this will have a negative impact for two reasons. Later planted corn will suffer a yield loss and producers will switch from corn to beans. Although this happens on the margin, it will be supportive to corn values which will be supportive to all feed grains and lower qualities of wheat.

Australia

In Australia, we have the opposite problem for much of the country. Queensland and New South Wales have seen excellent rainfall over the last 3 months. However, Victoria, South Australia and Western Australia have not been so fortunate.

On May 9 ^th , the Bureau of Meteorology released their long-term forecast. For the first time in months, they called for a return to “average to above average” rainfall from June forward. This would be timely and a bonus for growers in the impacted areas. It is worth noting that forward estimates continue to show a return to La Nina conditions by late winter.

Summary

Russian weather is front of mind for global wheat markets and has the ability to make or break prices over the next eight weeks as their winter wheats mature towards harvest under unusually dry conditions. US corn production is off to a poor start and acres are likely to be switched to oilseeds if the wet weather continues. Closer to home, many regions of the country have suffered a dry autumn and are in need of rainfall to recharge soil moisture. Although the BOM and other meteorological services are calling for conditions to improve – they never make it easy and straight forward!

The Year of the Dragon

Fri, 16 Feb 2024 06:23:00 GMT

Rowan Fessey 16 February 2024

China, one of the world's powerhouse economies, has been making headlines of late due to a pullback in its real estate and stock markets. This economic downturn is combined with a population that has been slow to come out of the Covid-19 lockdowns. Consequently, consumer price deflation is creating headwinds for the persistent growth that China has experienced over the past decades. However, amongst the economic slowdown, commodity imports remain resilient which is positive for Australian grain growers.

Chinese Property Headwinds – what is happening?

Property development in China is a central pillar of the economy and the key feature of the Chinese hybrid of combining government central planning with a free market approach. For years the Chinese government has incentivised infrastructure development as the key to economic growth, with the property sector now accounting for around 30% of China's GDP. Australia has been a major beneficiary of China’s property construction with raw materials, grain and meat fueling the Chinese construction industry and its labourers.

Similar to Australian property, Chinese property has been a proven method for households to grow wealth in China over the past decades. As a result, it is estimated more than 60% of household wealth is tied up in Chinese property which makes it all the more ominous when there are issues in the real estate sector.

The Evergrande Group, China's largest real estate developer began having issues in 2021 and has recently been ordered to liquidate all assets leaving normal Chinese household investors at risk of losing investments. However, a large program of government support looks to have stabilised the sector, slowing the property price declines.

Stability is also showing in the resilient pricing of key materials such as iron ore and coal with demand remaining robust. This is optimistic for our grain exports with Australia needing a healthy Chinese economy to ensure our sales continue to our best customer.

Advanced Wheat & Barley China Purchases

Chinese agricultural purchases have remained strong through the Australian harvest period right up until the current Chinese New Year holiday break. Against the backdrop of a slowing Chinese economy, the sales of Australian wheat, barley and sorghum into China are well advanced for this marketing year. The barley trade has been particularly strong since the removal of tariffs five months ago.

February WASDE data released last week reduced the estimated Chinese wheat imports slightly, from 12.5 million metric tonne (MMT) to 12MMT for the 2023-24 marketing year. Even with this reduction, 12MMT of wheat imports would still be the second largest level of Chinese wheat imports in the last 25 years, of which Australian grain should make up the majority.

To put the Australia to China wheat export program into perspective, in 2021-22 Australia exported 6.3MMT out of 9.57MMT million tonnes and a whopping 7.66MMT out of 13.28MMT national wheat crop in 2022-23 to China. So far this marketing year it is estimated that 4-5MMT has already been sold to China. According to ABS data, 700 thousand metric tonnes (KMT) was shipped between October and December 2023. These wheat sales to China will continue to be executed over the coming months out of most Australian port zones.

Australian barley sales are well advanced with 1.3MMT of barley exported during December 2023. Western Australia accounted for 651KMT with 469KMT from South Australia and a further 168KMT from Victoria. China was the primary destination with 1.16MMT shipped. The remaining 123KMT went to Japan.

China imported 2.52MMT of Australian barley between October and December 2023 and a total of 2.95MMT since exports resumed post tariff reduction. To put this in perspective, Australia’s total barley exports equaled 3.1MMT between October and December 2023. This is already around 50% of analysts' forecasted barley exports for the full marketing year. With the national barley export program so well advanced there is potential for over exporting and a tightening of the domestic barley SnD if sales continue at the current pace.

What does it all mean?

We have seen grain markets experience headwinds over the last few months and will need a catalyst to get them kicking again. That could come in the form of a weather issue in one of the world’s production areas. China, our largest grain trading partner, has shown us that although they may have economic headwinds of their own – their demand for all commodities remains strong. No one can pick the market top or bottom but a structured and disciplined grain marketing program will protect farmers in times of price uncertainty.

2024 – The Year of the Producer

Thu, 21 Dec 2023 23:39:00 GMT

2023 has been a volatile year for commodities markets. Although the war in the Black Sea continues, Ukrainian supply has slowly returned to the market. This has led to an overall decline in grain prices since this time last year. The world’s consumers have benefitted, but is the tide about to turn? If 2023 was the year of the consumer; will 2024 be the year of the producer?!

2023 Recap

2023 saw strong production outcomes in Europe and the Black Sea which impacted their local prices and made it difficult for Aussie grain to compete into Middle Eastern and North African markets. Russia has been in a fortunate position over the last two years to offer several large harvests in a row. The following two charts are from indexmundi.com .

The first chart shows the increase in acreage since the 2000’s. The second shows the increase in production over the same period. Where acreage is up by 10-15%, production is up by 30%. A large part of this increase is due to the quality of the seasons. Over the last 10 years, Russia simply hasn’t suffered a long lasting or high impacting drought. This is following devastating droughts in 1998, 2003, 2010 and 2013. In this instance, it is good to be good, but it is better to be lucky.

US wheat, corn and soybeans all suffered tough seasons in 2023. Two years of drought in the southern plains has led to a reduction in carry out in North America. Below trend production in Argentina, Canada and Australia this year has also had an impact. Overall, global carry out of wheat is anticipated to drop to 32% stocks to usage from 34% last year. If you remove China and India, the global carry out looks much worse. There is no room for another global production issue in wheat over the coming months without seeing a meaningful impact on prices.

Outlook for 2024

Although Australia had an impending El Nino for most of the year, our basis values did not improve until late in the year. Nationally, Australia will produce approximately 25 million metric tonne (MMT) of wheat this season. This is down from last season’s record 39MMT. The start of the 2024 calendar year will present southern hemisphere exporters with much less wheat to offer the world’s consumers.

It is currently anticipated that France has sown the smallest amount of wheat since 2000.

Record rainfall in France at the end of the sowing window has recharged water tables but prevented growers from completing their sowing program. The outcome is that 15% of the normal winter wheat sowing will be abandoned.

After two and a half years of drought, Argentina is finally returning to a normal production cycle. Their winter wheat production will complete at a poor 15MMT but it is expected that production of corn and oilseeds will rebound in the coming months. Also, a new anti-interventionist government is in power – it is hoped that export duties will be removed, but there have been no firm commitments at this stage. Alternatively, in the north of the continent, Brazil is expected to show a decline in oilseed production due to ongoing drought. This will also push back corn plantings in the new year, and it is likely that any pick up in Argentina will be offset in Brazil.

Closer to home, Australia is in the grips of an El Nino weather pattern which decreases the probability of rainfall and increases the probability of heat. However, the BOM is currently predicting this weather pattern to fall away early in 2024. Some forecasters are calling for the return of La Nina by mid-year!

What does this mean for grain prices?

A slow grind lower in prices over 2023 has benefited the global consumer at the expense of the global producer. However, it could be that the tide is turning with much decreased southern hemisphere production and risks that the coming season could not be as strong in Europe. Also, after a string of bumper harvests, does Russia’s luck run out?

Over 2024 we have a lot of production weather to get through, both locally and internationally. Also, we are entering an age of more and more political intervention. Be it in the form of aggression in the Black Sea or policy based such as in Argentina. As always, the markets will continue to be volatile and somewhat unpredictable. Under these circumstances, it is prudent to utilise a low risk and structured marketing program for your grain. Advantage Grain looks forward to working hard for Aussie growers again this coming marketing season.

Let’s hope 2024 is the year of the producer!

China wheat demand outpaces expectations as Australian harvest progresses

Thu, 16 Nov 2023 01:16:00 GMT

The 2022/23 marketing season has now come to a close.

Overall, the Advantage structured marketing programs have performed well through what was a volatile season. Ongoing war in the Black Sea, a tough finish to the U.S. corn crop and poor rainfall late in the Australian season all led to a late-season spike in local grain prices. Growers in the Advantage 10 month program benefited from this in the September – October pricing period.

As expected, China has re-entered the market as a strong buyer of Australian barley since the import tariffs have been lifted. China also continues to buy Australian wheat at a pace that is not as sustainable as the purchases during recent higher production years.

The canola market is still down from the start of the season but a recent uptick in pricing may suggest a turnaround is on the cards for the overall oilseeds markets.

Australian production outlook for the 2023/24 season

After prolonged talk of a potential El Niño, measurements finally triggered the BOM to declare the weather pattern in late winter. Since that time, the index sea surface temperature rose aggressively over August – October of this year. An Index measure of 0.8 indicates an El Niño weather pattern.

The impact of this weather pattern on finishing rains for the East Coast and South Australian growers was unfortunate. What was a strong first half of the growing season gave way to decreasing rainfall.

The saving grace for producers was a lack of associated extreme heat. The graphic below shows that apart from Northern WA, most of the growing crescent was able to get through without extreme heatwaves as the crops finished off in September and October.

Most analysts now view the national wheat production in the vicinity of 25 million metric tonne (MMT). This is well down on recent years but above the drought affected production years of 2017 – 2019 which dipped to 14.5MMT in 2019.

A good customer is a good friend!

China has returned as a buyer of Australian barley as they enter their third year of strong Australian wheat purchases. Since the import tariff was dropped, barley prices have rallied by over $40 AUD/MT which shows the importance of this market for Australia. In the meantime, China has been a continued buyer of Australian wheat. Last season their focus was on ASW1 from WA but this season they have shown a strong appetite for APW1 quality which is currently being sourced from all Australian states. Some estimate they may have already purchased over 3.5MMT with continued buying to do. With production well down on last season, this is not an inconsequential amount of purchases.

Could the tide be turning for oilseeds?

2023 was a challenging year for canola producers. A glut of Ukrainian oilseeds traveling over land into the EU impacted our largest and highest-priced buyer of Australian canola. This along with a better than anticipated rapeseed season in Canada weighed on values all year.

However, oilseeds may prove to be resilient in 2024.

Presently, Brazil is battling with excessive hot and dry weather in the north and flooding rains in the south of the country. They are now at the stage where yields and final plantings will start to be compromised. If this weather pattern continues all oilseed prices will benefit from the decline in their production.

Palm oil pricing is expected to rebound in 2024. Aging palm trees in Indonesia and Malaysia are experiencing a decline in yield prospects. This will assist canola and its by-products as substitutes.

Also, Europe is slowly working through the glut of Ukrainian oilseed and is expected to rebound their canola imports this coming year.

What does this mean for Aussie growers as we move into harvest and the new marketing year?

The 2022/23 grain marketing year was a volatile one with plenty of curve balls that required active participation in the markets to garner the best returns. This type of grain volatility is becoming more and more common with ongoing geopolitical tensions and extreme weather influencing markets.

The Advantage structured grain marketing program has helped growers navigate volatile markets in a low-risk and stress-free manner since 2008. Australian grain production is down on last season but there is continued strong demand for wheat and barley from China that will help support pricing. War continues to impact the Black Sea supply chain and there are threats to production in Brazil presently.

For a low-risk and stress-free grain marketing option to navigate these markets, please call Advantage Grain on 1300 245 586.

Weather systems in Australia, and their impact on crop production

Fri, 13 Oct 2023 01:54:00 GMT

On the whole, Australia has been blessed with three strong years of grain production from 2020 through to 2023. However, after a promising start to the year and with many areas of the country holding good moisture profiles after a wet summer, the last three months have turned dry. Most areas of the national growing belt are experiencing 50+ mm deficits in rainfall for the July to September period. Why the big change and what are the weather patterns driving this current dry spell?

Australia’s weather is impacted dramatically by three major weather systems/events; the Southern Oscillation Index (SOI), the Indian Ocean Dipole (IOD) and the Southern Annular Mode (SAM). These weather systems are ultimately driven by the trade winds and sea surface temperatures around Australia and have the greatest impact on rainfall across Australia.

Southern Oscillation Index

The El Nino-Southern Oscillation (ENSO) refers to the movement of rising air in the west, and falling air in the east which is called the Walker Circulation. These trade winds occur across the Pacific Ocean between Australia and Tahiti. There are three phases of SOI; neutral, La Niña, and the phase Australia is currently experiencing, El Niño.

During La Niña, trade winds strengthen, increasing the temperature of the warm water north of Australia. This causes cloudiness and rainfall to increase and typically leads to above average winter and spring rainfall totals across eastern and central parts of the country. From 2020 to the start of 2023 we were largely in a La Niña phase of the ENSO.

Alternatively, in the occurrence of an El Niño, trade winds weaken, or may even reverse, seeing warmer waters settle in the Central Pacific. As the usual westerlies stall, cloudiness and rainfall north of Australia are suppressed. This increases the probability of higher temperatures and lower rainfall for northern and eastern Australia. The weather pattern Australia is currently experiencing is El Niño.

Indian Ocean Dipole

The Indian Ocean Dipole (IOD) is a climatic phenomenon characterised by the difference in sea surface temperatures between the western and eastern parts of the Indian Ocean. There are two phases of this weather pattern; positive and negative. The phases are determined by where the warmer waters drift. During a positive cycle, warmer waters drift to the west of the Indian Ocean. Under a negative cycle, they drift to the east of the Indian Ocean, south of Indonesia, around the top end of Australia.

In the event of a positive IOD, warmer water settles in the Arabian Sea (Western Indian Ocean), and easterly wind anomalies across the Indian Ocean result in less cloudiness to Australia’s northwest, and less rainfall across the country. We are currently in a positive phase of the IOD

A negative IOD is the opposite, where the warmer waters move east across the Indian Ocean. The winds become more westerly, increasing convection and cloudiness, resulting in more rainfall across the top end and Southern Australia. Recent examples of the negative phase were spring of 2022 and before that, spring of 2016.

The current positive IOD has developed very quickly since July of this year. The event is typically a spring to summer phenomenon with almost all model forecasts calling for it to return to neutral measurements by February 2024.

Southern Annular Mode

Westerly winds in the mid-high latitudes, underneath Australia cause the movement of storms and clouds from Western Australia (WA) into South Australia (SA) and Victoria (VIC). The SAM can influence rainfall events differently depending on the current SOI, working conversely in summer and winter across the positive and negative SAM states.

During the winter, a positive SAM contracts winds towards Antarctica, resulting in weaker westerly winds and higher pressure over SA. This restricts cold fronts inland and leads to lower rainfall in SA, however, sees increased onshore flow for eastern Australia, bringing more rainfall.

During a negative SAM in winter, westerly winds expand northward to the equator, positioned closer to the bottom of Australia, bringing more cold fronts and storm systems to SA. However, the expansion of westerly winds toward Australia, pushes onshore flow away from the East Coast, generally resulting in less rainfall inland for VIC/NSW and along the East Coast.

During the summer, the SAM moves similarly to one in the winter. Westerly winds contract toward Antarctica causing more moist onshore flow from the Tasman and Coral Seas to push inland, leading to increased rainfall along the East Coast, which receives the bulk of Australia’s summer rains. The rain event experienced through northern VIC and southern NSW during the first week of October was during a positive phase of the SAM.

A negative SAM in the summer sees the belt of westerly winds expand toward the equator and Australia, pushing all onshore flow away from the East Coast. These stronger winds lead to less rain in the eastern and southern parts of the country, however, sees an increase in rainfall in Tasmania.

The Southern Annular Mode is a weather pattern that is relatively new to be studied. It is also worth noting that its influence on weather patterns usually lasts for one to two weeks as opposed to the ENSO or IOD which are longer term weather patterns.

What does it all mean for Aussie?

The ENSO, IOD and SAM have all been in phases that lead to a higher probability of higher temperatures and lower rainfall for most of Australia’s growing regions. We have all seen this for ourselves as Aussie endures a tougher finish to the season than would be preferred. However, it is worth noting that both the IOD and ENSO formed their current phases very quickly and could dissipate just as quickly. In particular, the IOD is likely to return to neutral by the end of the year. This would improve the flow of north-westerly weather patterns through Australia.

In their most recently updated crop outlook, ABARES is estimating a national wheat crop of 25.4MMT versus 39MMT last season. This would form a drop in wheat production of 35% from last season to the current one.

With ongoing market volatility and further potential impacts from weather related issues as we lead into harvest, utilising Advantage Grain’s dedicated team to manage your grain sales through this period will save you time and could yield real pricing benefits. To see how Advantage Grain’s pools performed last season, visit https://www.advantagegrain.com.au/results .

International relations improve the barley outlook

Tue, 15 Aug 2023 23:50:00 GMT

“In view of the changes in China’s barley market, it is no longer necessary to continue to impose anti-dumping duties and countervailing duties on imported barely from Australia” This was the statement from the Chinese Ministry of Commerce on Friday, August 4th which opened the market back up for Australian barley.

Background

In 2020, Chinese authorities instituted an 80.5% import tariff on all Australian barley. A tax of this size halted barley imports overnight and Australia was left with the loss of its largest barley customer. The charge at the time was that Australia was ‘dumping’ barley into China at below the domestic Australian price. The grain of truth in this argument was domestic barley prices in Queensland were in fact higher, but this was due to the region slowly exiting a prolonged drought. Barley prices in the export focused states of Western Australia and South Australia were, in fact, much lower. At the time, many viewed it as retribution for the Australian government at the time taking an international lead to demand more information on the origins of covid-19.

Trade

China was the largest buyer of Australian malt and feed barley in the years preceding the tariff. The loss of this market over the last three years has brought more traditional buyers such as Saudi Arabia and Japan back in as larger customers. This is a good thing and should support Australian malt and feed barley exports going forward.

The graph below shows China imported nearly six million metric tonnes (MMT) of barley in 2017. However, this number dropped during the two drought affected production years of 2018 and 2019. Then drops to zero by 2021, which was the first full year the tarrif was in effect.

WASDE

On Friday August 11th, the USDA updated their monthly World Agricultural Supply and Demand report. Overall, the report was bearish corn, neutral in wheat and supportive to soybeans. Their assessment of canola was dominated by a 1.3MMT decrease in Canadian production. This reflects the ongoing drought conditions afflicting central Canada. This reduced total production to 19MMT which would be the same as last year. With increased domestic consumption in the crush, Canada’s ending stocks were decreased by 265 thousand metric tonne (KMT) for this season. Australia’s production forecast was left unchanged at 4.9MMT.

Black Sea Update

On July 17th, Russia announced they would no longer participate in the Ukraine safe food corridor that had been brokered one year earlier by Turkey and the United Nations. The deal consisted of a narrow trade route that could be operated by merchant vessels for the bulk export of grains and oilseeds from the deepwater ports around the city of Odessa. Over the last 12 months, this route had accounted for approximately 2.5MMT of grain and oilseed exports per month. At the time of writing, no bulk exports had left through this route since the deal was closed last month. This puts more pressure on other logistics through neighboring countries or into continental Europe. However, the sea battle is now escalating with Ukraine using a maritime drone to attack a Russian oil tanker last week. This week, Russia responded by firing on a merchant vessel attempting to leave Odessa and then boarding the vessel. For now, the conflict will continue to impact the grain and oilseed markets as there seems to be no end to the hostilities in sight.

Summary

We applaud the Chinese government for taking the common-sense approach to cancel the tariff and we look forward to servicing their market once again. This will be a benefit to both Australian producers and Chinese consumers (they love our malt for beer!). Unfortunately, the conflict in the Black Sea region is now ratcheting up to take on a navel face as well, which adds risk to not only the Ukrainian but also Russian bulk ocean exports.

The USDA reported that the US looks to survive a tough and volatile season with trend production, but Canada is suffering the impacts with lower expected production. Global weather and geo-political uncertainty look set to continue for the foreseeable future as we prepare to focus on the business end of the production season with a rain-dance.

Best of luck to everyone this coming spring.

Global political and weather volatility continues while Aussie has a kinder June (for some)

Fri, 14 Jul 2023 22:44:00 GMT

Volatile Black Sea Politics Continue

NATO or the North Atlantic Treaty Organization was founded with the signing of The Washington Treaty on April 4th, 1949, by 12 original members. Membership currently stands at 31. The stated mission is “to guarantee the freedom and security of its members through political and military means”( https://www.nato.int/nato-welcome/index.html ). It was announced this week that Turkey had agreed to allow Sweden to join the collective security alliance after holding out over the last 12 months.

Below is a list of member countries and the year they joined.

At this stage, it is not clear what impact this will have on the extension of the Ukraine food corridor. Notably, Turkey was the main country to lobby Russia to support the grain corridor during the negotiation process for the last two deal extensions. The most recent extension is due to expire on July 18th, 2023. Russia has stated there can be no further extensions without removing a list of sanctions currently in place. Although, operating at approximately half the pre-war pace, Ukrainian grain and oilseeds exports through Black Sea bulk terminals currently account for roughly 2.5 MMT per month ( https://www.un.org/en/black-sea-grain-initiative/vessel-movements ) and would be difficult to achieve via land-based logistics. It is worth noting, the Odessa port facilities were subjected to rocket attacks the day following Turkey’s about-face on NATO membership.

Patchy North American weather continues

Over the month of June, the Midwest of the United States suffered one of its driest periods in 40 years. Crop ratings were downgraded and futures grew increasingly volatile. Over the first week of July, rains returned to areas desperate for moisture. US corn and soybean crop ratings are still at historical lows but the worst-case scenarios have been removed. However, central growing regions in Canada continue to experience severe dry conditions

As a result, we have seen Winnipeg canola futures rise $170 CAD per metric tonne since June 1st with approximately $80 AUD per metric tonne translating to the local markets. Although we don’t wish dry conditions on anyone, this crop production threat has helped to stabilise global canola prices after a challenging first six months of the year. The current 14-day outlook does not offer any widespread rain events for the hardest-hit Canadian areas.

China barley update

July 12th, 2023 marked the end of the three-month period for China to conduct its review of the barley tariff dispute. Chinese regulators have requested a one-month extension to conduct their review. This extension was agreed as part of the process in April. Much of the industry remains hopeful that China will extinguish the onerous tariffs in time for harvest of our new season produce.

BOM June outlook does not come to pass

Over the month of June, much of Australia (not all) received greater than forecast rains. This came as a welcome relief to the BOM forecast which had called for lower than average rainfall and higher than average temperatures for much of the broadacre cropping belt around the country. This rainfall outperformance has set many areas up with a decent base. However, parts of the country including much of Queensland, parts of northern and western New South Wales and northern Western Australia are still suffering from soil moisture shortfalls.

Summary

The Black Sea conflict continues to create uncertainty in agricultural markets as proponents of the Ukrainian food corridor look for a last-minute agreement to extend the supply chain. Turkey’s support of growing NATO adds to the brinkmanship in the region and does not bode well for a compromise with Russia.

Weather challenges to the growing seasons in the United States and Canada have increased market volatility since the start of June with canola being the main beneficiary. It is important that both countries have a near ideal second half to the season to attain trend yields.

The BOM maintains a concerning outlook for winter and spring weather in Australia. However, June national rainfall coverage was a pleasant surprise to the upside with many production areas now with solid moisture profiles in hand.

As political and weather volatility continue, Advantage is in the markets day in and day out marketing grain. Pool management focuses on the business of grain markets so that clients can focus on the business of farming.

Feed wheat, a harder season for Northern Hemisphere crops and El Niño Alert

Fri, 16 Jun 2023 02:28:00 GMT

Over the last month, we have seen excessive rainfall in China in the lead-up and during their local wheat harvest. EU winter crops and Russian spring wheat are all experiencing a hard finish to their growing season. Closer to home, Aussies brace for a possible impact from the El Niño alert issued by the Bureau of Meteorology (BOM).

China’s excessive rainfall

Two weeks of heavy rainfall over the end of May and the beginning of June has battered the Chinese wheat harvest. In the Hanan province, it is estimated that as much as one-third of the wheat crop could be sprouted. In a province expected to produce 40 million metric tonnes (MMT) of wheat, this could equate to over 10MMT of downgraded wheat that is unfit for human consumption. A June 7th article released by Reuters stated “Imports of wheat into China are already going up….if there is damage to the crop….then it’s likely that China will need to increase its imports next year”. ( https://www.reuters.com/markets/commodities/chinas-wheat-growers-face-disaster-after-heavy-rain-batters-crop-2023-06-07/ )

Once the rain settles, it is most likely that China will suffer 5 – 10MMT of wheat downgrades this season. They are already a strong buyer of Australian wheat accounting for over 5.5MMT of Australian wheat exports so far in the 2022-23 season. It looks like this trend may be set to continue.

USDA Crop Conditions Update

On Monday, June 12th, the USDA updated their crop conditions for corn and soybeans. The weekly rating system has corn at 61% good to excellent. This is down from last year’s 72% on the same date and a 10-year average of 71%. The soybean crop ratings showed similar disparities. This is following on from one of the driest Mays in history for the eastern corn belt of the United States. As a consequence, we have seen futures values jump from their lows of late May. US corn growers require a strong turnaround in weather with consistent follow-up rainfall to avoid real yield penalties this season.

European Union and Black Sea crops face a tougher finish

The EU and Russia have both enjoyed a positive season through the Northern Hemisphere spring. However, as Northern Europe’s summer starts, the spring wheat regions of Russia have turned dry. At this stage, it does not appear to have affected markets, but a continuation would take the top off production. One of the weights on global grain markets over the last few months has been the bigger than expected Russian wheat exports. A hard finish for their spring wheat would reduce Russia’s ability to continue exports at this pace.

BOM raises ENSO outlook to El Niño alert

On the 6th of June, BOM raised the ENSO outlook from El Niño Watch to El Niño Alert. This update means there is approximately a 70% chance of El Niño forming at some point in 2023.

An El Niño does not guarantee an extremely hard season in Australia. In the last four major El Niño events going back to 1997, three produced a year over year decrease in national production. Of those three years, only one, in 2002, measured a decrease in production greater than 16% from the prior season.

It is worth noting that soil moisture in many growing areas through the Australian wheat belt is good. On top of this, recent rains through growing regions from WA’s Great Southern through SA and VIC and up into Southern NSW have further improved the outlook. Although, there are some areas that missed out.

Overall, there is a long growing season with plenty of uncertainty ahead for both the southern and northern hemispheres. One thing is for certain though – grain price volatility will continue.

Advantage Grain makes its entrance into Aussie grain export market

Thu, 01 Jun 2023 05:25:00 GMT

Advantage Grain Pty Ltd has announced its entrance into the grain export market, with the company’s first wheat vessel loaded and on its way to the Middle East where it will be used for flour milling.

The Queen Harmony set sail from South Australia’s Thevenard Port on 16 May, filled with 22 thousand tonnes of APW1 quality wheat.

Traditionally a domestic market player, Advantage Grain seized the opportunity to deliver improved returns to its pool customers via the export market this season, with the assistance of export marketing and logistics specialist Basis Commodities .

Advantage Grain General Manager, Chris Nikolaou said the company’s foray into the grain export market marks a significant milestone for the company.

“Advantage Grain has experienced positive growth over the past three years, and we are extremely pleased to have the capacity to generate more value for growers when opportunities such as these arise,” Mr Nikolaou said.

“Generating value for our customers is at the core of everything we do, and adding export to our tool belt when the numbers add up assists us to provide that value.

“Moving forward, the ongoing conflict in Ukraine is likely to continue to contribute volatility to global grain markets.

“In this regard, Advantage will continue to pursue the best outcomes for our pool growers in either the domestic or export markets; but only when we are comfortable the risk profile is low.

“Our commitment to low risk selling by averaging out over the course of the season will always be the focus.

“Advantage Grain is very grateful to the grower clients who pool with us, and we look forward to working for them and with them in the seasons to come.”

Advantage has been partnering with farmers to market their wheat, barley and canola since 2008, and has delivered more than four million tonnes of Australian grain into its annual programs during this time.

Over the years the program has evolved to meet changing farmer and market needs, but its core concept of reducing risk by selling an equal portion of grain each month over a set time period has remained constant.

Weather and Supply Dominating Grain Market Direction

Tue, 16 May 2023 00:50:00 GMT

On Friday, May 12th the USDA updated the world agricultural supply and demand tables. This included the first estimates for the 2023-24 season. Wheat was viewed as bullish as the global carry-out is estimated to fall this coming year. Of note was the decline in U.S. production as drought-hit Kansas is expected to produce the smallest crop in over 50 years. Global production estimates all rely on weather performing over the coming months in key production areas of Russia and Canada for wheat and the United States for corn and soybeans. A tightening wheat balance sheet does not leave room for any further production issues in other major exporters.

U.S. wheat does it tough

Record abandonment through Kansas, Oklahoma, and Texas has led to this year’s Hard Red Winter crop estimate to be even smaller than 2022’s drought-hit production. However, eastern production of SRW quality has rebounded.

Global importers will switch to other producers such as the EU, Russia, and Australia as U.S. prices remain elevated to ration supply. Right now, the outlook is positive for the EU, but Russia still has some time to go as spring wheat makes up a third of their production and can be impacted over the northern hemisphere summer.

Large parts of Canada through Alberta and Saskatchewan are currently under drought conditions. They will be looking for rain over the coming months to ease these conditions.

U.S. wheat production has stagnated at the lower end of the range for three years running as drought persists. See figure 3 below.

Concurrently, since 2012 we have seen a trendline increase in Russian production. See figure 4 below.

If balance sheets are tight, why has the price decreased over the last two months?

In their recent report, the USDA raised the carry out of Russia and the EU by a combined 7MMT for the current season. This was based on reduced domestic demand, reduced exports, and a glut of Ukrainian grain that has been transshipped by road into the EU. This unexpected extra supply entering the markets has impacted wheat and also canola prices as the EU works through this grain. There are also rumours in the market that last season’s Russian crop was larger than the USDA has it. Some say the USDA’s production estimate could be too low by 10MMT. However, this remains unconfirmed.

Although global pricing has deteriorated, demand for Australian grain and oilseeds remains elevated. The Australian Bureau of Statistics reported in March there was 3.73MMT of wheat exported from Australia. This was a new record. They went on to report that a combined 5.1MMT of wheat, barley, and canola was exported. Also, a new record.

What is the global outlook?

A third year of below-average U.S. wheat production has put pressure on global wheat balance sheets. There is no room for any further supply disruptions. Presently, EU crops look good. However, Canada remains under widespread pressure with ‘abnormally dry to moderate drought’ affecting much of the prairies. Also, Russia is unlikely to produce the bin buster they had last season. Closer to home the forecast of an El Nino event raises the uncertainty around our own production and any impact that could have on North America and the EU.

There is a great deal of weather to get through over the coming months including our own in Australia and markets will continue to react accordingly.

Best of luck for the coming production season.

Continued Turbulence in Global Commodity and Capital Markets

Mon, 17 Apr 2023 10:06:00 GMT

March 2023 saw continued turbulence in global commodity and capital markets. Ongoing economic uncertainty, geopolitical tensions, and concerns over inflation and interest rates were among the drivers of market volatility. A steady stream of headlines relating to global weather and crop conditions, the continuing flow of low-cost Black Sea origin grain into the global market and light at the end of the tunnel after a three year Australian barley export tariff into China saw agricultural markets respond accordingly.

Financial Markets

Confidence in the US banking sector took a hit during March with both Credit Suisse and Silicon Valley Bank undergoing significant restructuring to prevent further broader issues. Markets responded by reducing risk with crude oil, gas and agricultural markets not immune to the sell-down. This flowed through to domestic oilseed pricing. However, energy and oilseed markets were given a much-needed boost towards the end of March after OPEC unexpectedly announced a cut to oil production by more than one million barrels per day.

Weather & Crop Conditions

Rainfall across grain growing regions in March was pleasing, particularly after the ominous forecasts showing a return to a “Neutral” phase ENSO and a 50% chance of El Nino in later 2023. Temperatures through March were slightly above long-term averages. During the latter half of the month, heatwaves led to record-breaking temperatures at numerous stations in New South Wales, Victoria, parts of Pastoral South Australia, and south-eastern Queensland.

The steady rain across the country prompted a trickle of grower selling during March putting pressure on domestic markets.

Further abroad, conditions in major US hard red winter production areas in Kansas, Texas and Oklahoma continue to go backward. The latest USDA crop progress report has only 27% of the crop in good-excellent condition, which is a record low for April, suggesting poor yield potential without a dramatic improvement in weather.

Global Pricing Complex

Russia’s record wheat crop continues to flow into the global marketplace at a rapid pace and highly competitive values. The UN’s negotiated Grain Corridor was extended by another 60 days allowing Black Sea exports to continue unhindered. Russian March exports are estimated at 4.5MMT, another monthly record, and are dominating major global tenders setting the tone for global values and putting pressure on Australia to remain competitive.

The Australian shipping stem continues to be added to, albeit at a slower rate as non-traditional buyers further abroad in the Middle East and North Africa have switched back to cheaper Black Sea suppliers where possible. Traditional Asian export destinations continue to tick over.

To further complicate global pricing, Russian officials recently indicated the need for Russian exporters to loosely adhere to a floor price for wheat sales. As a result, a number of large multinational grain companies made the decision to cease upcountry Russian operations. The threat of Russian political intervention in the markets is ever present and adds a layer of risk to Black Sea exports. Luckily, Australia is a transparent and good faith actor in global markets, which buyers appreciate!

Promising News for Australian Barley

Encouraging developments have come to light for Australian barley growers and the broader Australian feed grain market.

The Australian federal government has agreed to temporarily halt its appeal to the World Trade Organization (WTO) regarding the Chinese government’s 80% tariffs on Australian barley. This comes just before the WTO was set to announce its finding on the matter and in return, China has committed to an “expedited review” of the tariffs within the next three months.

China has historically been the most important buyer of Australian barley, accounting for between 50-85% of Australian barley export trade between 2014-2020. Since implementation of the tariff, the main destination for Australian barley has been Saudi Arabia where we have a freight disadvantage from other origins. Australian barley growers would benefit immensely from our freight advantage into China if free trade can resume.

What does this mean for local grain markets?

As we can see, grain markets face cross winds from political events, the global financial outlook and from a fundamental point of view. One thing is for certain, volatility is set to continue. Amongst this backdrop, Advantage will continue to maintain the program mandate of low risk selling over a pre-set period of time. In the meantime, we wish all Australian producers a safe and productive sowing period for the upcoming program.

Local Grain Markets Show Resilience Against Declining International Values.

Thu, 16 Mar 2023 02:47:00 GMT

Activity in grain market influences such as the global economic landscape, domestic export pace, demand and weather, continue to dominate chatter in the industry. However, despite the backdrop of a high interest rate, deflationary environment and declining international grain values, Australian grain markets have shown great resilience over the past month. This is a credit to our record export pace, the expected change to the 2023/24 season climate outlook and increasing cattle on feed numbers as a result of weakening livestock markets.

Record Shipping Pace

Recently released January export data showed that records were made to be broken! Australian grain is flowing out of the country in record volumes creating a solid base of bids for most qualities of wheat, barley and canola in all port zones. Australia exported a record large 3.336MMT of wheat in January up from 2.667MMT in December. This smashed the previous largest monthly wheat exports of 2.765MMT from June 2021. All states had large January wheat exports with SA being the standout with 797KMT shipped, which was almost 50% higher than their December numbers. WA exported 1.14MMT of wheat in Jan, just short of the record 1.157MMT in December.

Investment in road and rail logistics look to be paying dividends as export pathways are running efficiently and without the delays we saw through 2022. As a result, exporters have continued to add volume to the shipping stem for the coming months which should continue to provide a solid bid for those still holding grain.

Changing Weather Patterns

In its latest climate driver update released on March 14, 2023, the Australian Bureau of Meteorology (BOM) reported the La Niña event that brought wet and cool weather patterns to Australia since late 2020 has officially ended. The El Niño–Southern Oscillation (ENSO) is now neutral and expected to stay this way through autumn. In the same update, the BOM also issued an El Niño watch with signs this weather pattern could form later in the year.

With almost three years of above average rainfall, moisture profiles are still healthy throughout most of Queensland, New South Wales and Victoria. However, the shift in weather predictions will likely change planting intentions over the next few months as farmers keep a close eye on further updates. The drier outlook, although not ideal for finishing crops in the spring, are expected to see price volatility continue as we move through the autumn months and beyond.

Falling Livestock Prices

Over the last five months, Australian livestock prices have seen large falls with sheep and cattle markets coming under pressure.

For the first time since the early months of 2020, when the Australian livestock industry was grappling with a severe, nation-wide drought, the Eastern Young Cattle Indicator has dropped below the 600c/kg mark. Restockers who played a key role in pushing livestock prices to record highs as Australia emerged out of drought, are now slowing restocking rates in the Southern States and reducing herd sizes in the north in line with drier weather predictions.

Meat and Livestock Australia (MLA) sales data from the first week of March showed there was a significant increase in the number of young cattle offered. This included 71% more inventory offered than the same week in 2022, 28% more than the same week in 2021 and 26% more than the same week in 2020.

The buyer breakdown for the same MLA data set showed lotfeeders accounted for 58% of the purchases and restockers/traders accounted for only 34% with processors buying the balance.

This is important for the Australian feed grain demand profile. With cattle on feed numbers on the rise we can expect to see increased volatility in domestic feed grain values.

What does this mean for local grain prices?

Local grain prices are starting to run their own race with domestic pricing influences having a stronger effect than international market drivers, a contrast to what we’ve seen over the past few years. Although the market dynamics have changed, price volatility looks to continue for the short to medium term as strong export demand, local feed demand and a drier outlook create a solid base for Australian grain.

Grain Market Volatility Continues

Wed, 15 Feb 2023 23:29:00 GMT

Grain market volatility continues to be a defining trait of the markets. The Ukraine conflict is ongoing with another round of food corridor extension talks commencing. Over the last six months, drought in Argentina has impacted their wheat and soybean crops and now threatens their corn crop as well. On a more positive note, Australian relations with China are improving and the industry is hopeful for a renewed barley market. Locally, Aussie growers have managed through an extraordinary harvest with extreme weather, a late finish and a slightly better than expected product.

Black Sea Update

February 24, 2023, will mark the one year anniversary of the Russian invasion of Ukraine. The impact on Ukrainian agriculture cannot be understated. Locally, farmers are struggling to access labour, inputs and logistics while also managing through the day-to-day safety concerns of the conflict. It is estimated the winter wheat acreage will be down 40% from last year.

In July of last year, a ‘safe food corridor’ was negotiated with Russia by the United Nations and Turkey for Ukrainian grain exports to continue. The current agreement expires in Mid-March and is being used as an argument to reduce economic sanctions by the Russian authorities.

The short-term impact of this ongoing conflict has been increased price volatility. The long-term impact will be damage done to the Ukraine agriculture industry. In the meantime, Russia is set to export a record wheat program this season. However, it is unlikely their new crop, which is harvested from July, is as big as the current crop.

A tough year in Argentina

The La Niña weather conditions have been overall kind to Australia, bringing moisture and cool temps to grow above average crops in the areas not impacted by flooding. However, for our neighbors across the Pacific, this weather pattern has been extremely harsh. In the latest USDA report, they have wheat, corn and soybean production down a combined 15MMT. This number is likely to increase over the coming months as the pattern continues to take a toll on unharvested corn and soybeans. The smaller wheat crop has meant more limited competition in Asia for Australian grain.

International Relations with China

In mid-2022, the Deputy Prime Minister and Defence Minister of Australia met with the Chinese Defence Minister at a conference in Singapore. This was the highest-level official meeting between the two countries in three years and was the beginning of what appears to be a thawing in relations. We are beginning to see the impacts in improved trade. A January 10th article in Reuters reports “China’s decision to allow imports of Australian coal after more than two years of an unofficial ban is one of those moves where the symbolic importance outweighs the practical impact”. https://www.reuters.com/markets/commodities/chinas-easing-australian-coal-ban-is-symbolic-not-market-shifting-russell-2023-01-09/.

Locally, grain exporters are hopeful this is indicative of a future relaxation of the barley import tariff which was levied in 2020. Reopening this market would be an excellent result for feed barley growers in Australia.

Australian harvest update

Now that the Australian harvest is complete – let’s take a moment to congratulate our growers on surviving what turned out to be a marathon! Ongoing cool and wet conditions lent itself to a late crop, with a late harvest start and late finish. On a national basis, the crop was good. The most recent USDA report estimated Australian wheat production at 38MMT. If this is true, this would be a new record. However, the conditions were also unkind to some with washouts, disease and missed paddocks a common theme in parts of NSW, VIC and SA. Over harvest, grain markets reacted to a better than expected crop, particularly in January, when the late harvest was going full swing. However, we are now seeing prices improve in the post-harvest period with demand going strong. In particular, the South Australian shipping stem is as well booked as we have seen in many years.

What does this mean for local grain prices?

As we said at the start, grain volatility continues to be the defining trait of the markets. With our local rollercoaster harvest done and dusted, and the Australian crop size known, prices have started to lift from harvest lows. However, as seems to be the norm in recent years, with external factors like the ongoing conflict in the Ukraine, drought ravaging Argentina and easing tensions in China, market volatility is expected to continue.

Advantage Grain has helped many farmers navigate volatile markets over the years. If you’re still holding grain and planning on marketing it throughout the year, we can help. Our March 4 and Flexi programs remain open for transfers. The 4 month program sells a 25% portion of your grain each month from March until June. The Flexi program allows you to choose which months you wish to sell your grain from now until the end of October 2023. Both programs have advance, monthly and deferred payment options.

If you’d like some more information on these programs, visit our programs page or call the team on 1300 245 586.

Wheat: 11% Protein and 89% Politics

Fri, 23 Dec 2022 10:20:00 GMT

Over the course of the 2022 grain marketing year, we saw extreme volatility in grain markets. It all started in March last year when Russian forces entered Ukraine and hostilities commenced. Three months later a safe grain corridor was negotiated for Ukrainian grain between the UN, Turkey and Russia which was set to expire in November, but was unofficially extended for 120 days. On top of this, the U.S. experienced a drought that decreased their production of wheat. Locally, excessive rainfall due to a trifecta of weather patterns had a severe impact on crop outlooks, particularly for NSW. Nationally, Australian grain was in high demand globally and this is expected to continue into 2023 season.

Conflict in Russia

It was once said that “roughly speaking; wheat is 11% protein and 89% politics”. In no year has this been truer than in 2022. The conflict in Ukraine blocked all ocean freight exports for three months before the Ukraine grain corridor re-opened this pathway at a much-reduced rate. Russia under pressure from the UN, Turkey and other global importers of food faced criticism for the impact this conflict has had on global food security and pricing. They are currently renegotiating the corridor and the market remains uncertain of how this will play out. Following on from this, expectations for plantings of grain in Ukraine for the coming growing season are at 50% of normal. The impact of this conflict will be felt for seasons to come.

US wheat production suffers through two poor seasons

The effect of the on-going La Nina has been wetter and cooler weather in Australia. However, in North America the impact has been the opposite. Over the course of 2021 both the United States and Canada suffered drought. This season the U.S. recorded its second straight drought affected wheat crop. Production over both seasons is down approximately 10% from the 2020 season which was the last strong production year. The impact is lower stocks and higher prices in the US as they ration demand domestically.

Australia’s East Coast breaks records

Towns in the Central West of NSW are on track to meet or exceed previous flooding events. Along the Lachlan River towns such as Condobolin and Euabalong have experienced flooding not seen in 70 years. This is due to a trifecta of weather patterns that have aligned to create these extreme wet and cool conditions.

An unlikely third year of La Nina in the Pacific ocean is causing coastal waters off of Australia to warm and the Southern Oscillation Index to contribute to tropical cloud patterns in Eastern Australia.

Second, the Indian Ocean Dipole continues to register in a negative phase. This increases the likelihood of weather patterns that swing across Australia from Northwest to Southeast.

Thirdly, the Southern Annular Mode (SAM) is still in a positive state. A positive phase of the SAM shifts westerly winds south of Australia closer to Antarctica. As consequence, we do not experience westerlies that come across inland pushing weather out from the East coast.

It is predicted that all three of these weather phenomena will break down over the coming months.

Over the course of 2022, we saw extreme volatility in grain markets due to the conflict in Ukraine and poor production in the U.S. Presently, there is no end in sight as no talks are being had between Russia and Ukraine. The grain corridor and its effect on grain markets will continue to be volatile as farmers in Ukraine sow less crops as the war takes its toll.

What does it all mean for the coming season?

Overall, Australia is expected to produce a good crop this harvest, albeit a late one. However, certain areas in NSW and VIC have seen crop losses and downgrades due to excessive rainfall.

In these volatile times, the Advantage pooling systems have performed well with solid returns and a low risk approach to grain marketing. With so many external factors, and markets able to change at the drop of a hat, you can never completely predict where prices will head post-harvest. However, looking at the information available, the 2022/23 grain marketing year is shaping up to be a positive one for Aussie growers.

Advantage pooling products are available to growers again in 2022/23 to assist with your post harvest marketing and give you managed exposure to post harvest rallies if they occur. We accept all grades of wheat, barley and canola, have an advanced, monthly and deferred payment option, as well as multiple duration programs to manage your cashflow throughout the year.

The 2, 5 and 10 programs will be closing for transfers on Friday 20th January.

For more information on the pools and how we can help you this season, visit the programs page of our website https://www.advantagegrain.com.au/advantage-programs or call the team on 1300 245 586.

U.S. Wheat Supply Cuts and The Big Wet

Fri, 14 Oct 2022 05:38:00 GMT

Global wheat markets have surged higher with the U.S. and Black Sea facing production and logistics issues. The conflict in Ukraine, which appears unable to be de-escalate along with expensive U.S. wheat, will ensure strong demand for Australian production. At home, we’re looking at another big winter crop, and although it looks like the La Niña weather pattern will present challenges over harvest, all grades of Aussie wheat look like they’re set to achieve strong values on the global market.

Global Wheat Supply Concerns

U.S. wheat prices have surged of late, disconnecting themselves from the global wheat market. This was spurred on when the USDA unexpectedly reduced the 2022/23 U.S. crop by 133 million bushels or 3.6 million tonnes. The flow on from this is the U.S will ration their wheat for internal use, resulting in the global trade having one less well supplied origin to source grain from.

Australian wheat will predominately compete with Russian, Ukrainian and European supplies for this coming season. Russian exports have flowed steadily throughout September with the Russian grain analyst Sovecon estimating Russia’s September wheat exports at 4.1 MMT. However, concern remains that Russia will not continue to support the Ukrainian Food Corridor deal due to the ongoing war. This agreement is due for review in November. If the deal is cancelled and Black Sea trade flows are hindered in a significant way, Australian supplies will be extremely important to satisfy global demand in a time where the global wheat balance sheet is extremely tight.

When considering only the major wheat exporters, which account for nearly 90% of global trade, Reuters report that wheat stocks-to-use is expected to fall 13.8% in 2022/23. (Karen Braun, Reuters https://www.reuters.com/markets/commodities/outcast-russias-crop-export-success-vital-lean-global-wheat-rations-2022-09-21/) This is the second lowest behind 13.1% in 2007/08 and down from 14.7% in 2021/22. With U.S. exports diminished and further disruptions in the Black Sea likely, Australian growers will have a big part to play in feeding the world in 2023.

Wet Weather Challenges

Australian growers love a challenge and the 2022/23 harvest will likely be another huge one! The strong La Niña weather pattern continues to batter Eastern Australia with unrelenting rain hitting cropping areas in the past weeks. Quality and logistics in NSW and parts of Victoria will be challenging with many regions soaked and unable to hold heavy machinery. The season is looking likely to be 3-4 weeks delayed across most of NSW and parts of VIC with crop development slowed by a mild and wet spring. Parts of SA and WA will also be 1-2 weeks late but overall, crop conditions in SA and WA are improving with consistent showers and weather starting to warm.

Delays and downgrades are looking likely in NSW. As a consequence, millers have been actively seeking forward commitments of new crop milling wheat. This has proved difficult as they have been met with limited grower engagement as producers wait to see what they have on hand at harvest rather than take on washout risk.

Shipping slots for 2023 have been snapped up at record pace across the country, with capacity in most port zones sold out until September. Lower quality Australian wheat prices were relatively well supported by global prices during the 2021/22 marketing year. If there is a silver lining to the excessive wet, this coming season should also be a great opportunity for all grades of Australian wheat to achieve strong values on the global market.

With so many external factors, and markets able to change at the drop of a hat, you can never completely predict where prices will head post harvest. However, looking at the information available, the 2022/23 grain marketing year is shaping up to be a positive one for Aussie growers. Reserving a portion of your grain to be marketed throughout 2023 could provide significant benefit. Advantage pooling products will be available to growers again in 2022/23 to assist with your post harvest marketing and give you managed exposure to post harvest rallies if they occur. We accept all grades of wheat, barley and canola, have an advanced, monthly and deferred payment option, as well as multiple duration programs to manage your cashflow throughout the year. For more information on the pools and how we can help you this season, visit the website advantagegrain.com.au or call the team on 1300 245 586.

Volatility Continues as Putin shows his grip over the Black Sea Supply Chain

Thu, 15 Sep 2022 02:33:00 GMT

What a difference a week can make! Since Russia and Ukraine signed the UN brokered Food Export Corridor deal in July, we’ve seen reduced market volatility compared with the first half of the year. However, last week we saw how sensitive these markets are to possible changes in this agreement and how world wheat supplies are still struggling without adequate Ukrainian products. Closer to home, Australia is looking well set up to reach a forecast production of 55MMT, the fourth largest on record, with favourable weather set to hit key production areas during the vital spring growing period.

Over the past few months, we’ve seen the export corridor for Black Sea production slowly improve, allowing Ukrainian and Russian wheat to trickle onto the global market. A speech from Putin at the Eastern Economic Forum last week showed us how quickly the script can flip and how sensitive these markets are to changes in rhetoric from the Russian leader. In his speech, Putin cast doubt on the longer-term viability of the UN brokered Food Export Corridor, stating “Russia had signed the deal in July, on the understanding it would help alleviate surging food prices in the developing world, but instead it was rich Western countries that were taking advantage of the deal” ( Reuters, September 2022 https://www.reuters.com/markets/europe/putin-says-wants-restrict-destinations-ukraines-grain-exports-2022-09-07/ ). Reuters reported that during the forum, Putin expressed that he believed Russia had done everything it could to ensure Ukraine was able to export its grain, but problems on the global food market were likely to deepen.

So, what does this mean for grain markets? Australian growers know all too well the financial impacts global disputes can have on their production and its marketable value. At times, we have been the beneficiaries, but have also lost key markets for products such as barley. The volatility that policy changes and global events create has been particularly extreme this year with monthly trading ranges on wheat markets at historic highs. Putin casting doubt on the Food Export Corridor deal could cause this to continue as we head into harvest and the new crop marketing season.

Closer to home, the Australian 2022/23 season continues to gather momentum with more rainfall across key production areas throughout August.

ABARES released their September production estimates for the new season with total winter crop production in 2022/23 forecast to reach 55MMT, which would be the fourth largest ever. Wheat production is forecast to be the second highest on record at 32.2MMT, which is an 11% decrease from the record level reached last year. Barley production is forecast to reach 12.3MMT, the fourth largest on record. Canola production is forecast to also reach the second highest on record at 6.6MMT, a 2% decrease from the record reached last year.

Australian exports will be in high demand again in 2023 with ongoing tight global balance sheets and an unreliable and diminished supply chain coming out of the Black Sea.

Over the 2021/2022 marketing season we have seen extreme price volatility. Global supply chains will continue to attempt to adapt to the war in Ukraine, however, as seen last week, the environment can quickly change, and return us to the extreme grain price volatility we have experienced this year. In environments like this, having a professional team in the markets every day on your behalf can provide real value to your business. The Advantage pooling products have achieved strong results for growers this year, capturing volatility and allowing growers to avoid the stress of brutal price moves and focus on producing world class crops.

Italians Raise Concern For Penne Pasta and Risotto Rice Dishes.

Wed, 17 Aug 2022 04:39:00 GMT

An ongoing strong La Niña has led to wetter than normal conditions in Australia and dryer than average conditions in the United States and the growing regions of South America. Western Europe is also struggling with dry and hot conditions. Australian exports continue at a strong pace while the market switches focus to the outlook for new crop locally.

La Niña roars on

In their August 11th update the Bureau of Meteorology predicted a wetter than average spring rainfall for the eastern and southern parts of Australia. They went on to state that a “negative Indian Ocean Dipole event, warmer than average waters around northern Australia and a neutral to cool phase of the El Niño – Southern Oscillation are influencing this outlook”.

The impacts of this weather phenomenon have been felt in the southern states of the U.S. where Texas has recorded one of its driest years in 130 years of data records. Oklahoma, Kansas and Nebraska have also been doing it tough with crop ratings for corn and soybeans falling in recent weeks.

Across the pond in Europe, the Rhine River levels in France are so low that commercial shipping has been impacted. Cnn.com reports in an article dated August 14th that 63% of the UK and EU are in either drought warning or alert status.

This drought has impacted EU summer corn production severely. The USDA reduced European corn production this month by 8MMT to 60MMT. Local observers say this number should reduce further.

In Italy, durum wheat and summer rice production have been cut by the poor conditions. The local Italian ag reporting agency Coldiretti reports that wheat and rice yields have dropped by 30%. Farmer associations are calling for government assistance with Coldiretti agency president Ettore Prandini stating “it is necessary to intervene immediately with emergency measures to save crops...and farms that are in serious difficulty”.

Argentina continues to experience hot and dry conditions. The August 11th USDA report reduced wheat production by 500KMT on account of the poor growing conditions. This is 3.5MMT lower than last season and it is expected that Argentina will be a much-reduced exporter this season.

Local conditions improve but many doing it tough in NSW

Over the recent month, growing conditions have improved in many areas of the country. Much of WA, western SA and Victoria are seeing improved conditions for their crops. However, many crops in SA are late and there are areas in eastern SA that have not see adequate rainfall. Also, excessive rainfall in NSW continues to cause havoc. A full profile does not have the ability to absorb ongoing rainfall leading to damaging run-off and large areas that were never planted. It is estimated that 10 - 15% of acres were either not planted or have been washed out. This excessive rainfall is also making a difficult supply chain more challenging with anecdotal reports of difficulties getting truck access to on-farm grain.

The USDA report on August 11th called for an Australian wheat crop of 33MMT for the coming season. This would be an excellent outcome, if achieved. However, we are more circumspect. Over the coming months there remains many weather risks to overcome. Best of luck this spring for a kind finish to the season.

Australian Grain Exports Face Challenges

Mon, 18 Jul 2022 02:35:00 GMT

Extreme volatility continues in offshore markets as the world grapples with the lack of Ukrainian supplies while elsewhere in the northern hemisphere, wheat harvest is in full swing. Closer to home Australian exports for the season continue to show good pace in spite of pandemic challenges to supply chain and weather-related setbacks. Current outlooks for a return of La Niña in the spring and the Indian Ocean Dipole status offer hope for a positive year for Australian producers

Ukraine and Northern Hemisphere Harvest

Over the last four weeks there has been ongoing discussion for a food corridor for Ukrainian grain. Currently, about 25% of normal exports are happening by way of land transport through European countries and not through the normal Black Sea shipping lanes. Turkey has led these discussions which include Russia, Ukraine, Egypt and member states of the EU. At the beginning of the war, Ukraine laid water mines in the normal shipping routes for fear Russia would invade the key port area of Odessa. Estimates are as high as 25MMT of wheat is stranded in silos around Odessa. However, de-mining these waterways is a big risk for Ukraine if Russia takes advantage to attack Odessa. It is also worth noting that domestic prices have collapsed in Ukraine putting great pressure on the country’s producers. A truly horrible situation all around.

After a tough spring, northern hemisphere farmers in the US and EU are cutting wheat furiously. Yields are down from last season in both the key growing areas of Kansas in the US and France in the EU. Hot and dry weather impacted Kansas production early while France has suffered a tough finish.

The double impact of hope for a Ukraine food corridor and fresh supply arriving, has led to a decrease in global pricing. However, it should be noted that global cash markets have not decreased to the degree of futures markets.

Australian Grain Exports Remain Strong

Between the months of October 2021 and May 2022, ABS data shows that Australia has shipped 18MMT of wheat. At this pace, total season wheat exports should hit the 27MMT mark. An excellent result for producers. Big crops and big demand are what you want!

However, there have been supply chain setbacks due to the pandemic and weather. All states are reporting the difficulty of getting consistent access to road freight. Bouts of COVID are knocking out truck drivers and also impacting locomotive crews. However, reductions in close contact rules have made this easier to navigate.

Recent wet weather in NSW has impacted rail line transport. Grain Central reported in a July 13th article that Pacific National (a major grain hauler in NSW) stated ‘since July 4th, around 43% of grain hauling services have been knocked out by flooding or damage caused by excessive rain’ ( https://www.graincentral.com/news/gunning-derailment-ups-pressure-on-stressed-nsw-network/ ) . At the risk of profanity, presently NSW could do with a little less rain and a little more sunshine.

Weather Outlook Remains Positive

The Bureau of Meteorology updated their 3 month outlook on July 14th. They stated, “the August to October rainfall is likely to be above median for the eastern two-thirds of Australia”. This is largely due to a currently neutral El Nino-southern oscillation which is expected to enter La Niña again in spring. Also, the Indian Ocean Dipole is in negative phase. This phase increases the likelihood of wet weather by way of patterns that sweep southeast across the country from Northern WA and the tropics.

In summary, the outlook remains positive for Australian producers. For the most part, the Australian weather outlook is supportive with higher likelihood of national rainfall than not. Global grain prices and demand for Australian product remain elevated.

Best of luck to producers over the coming key growing months!

Global Volatility and Positive Australian Weather Outlook

Thu, 16 Jun 2022 00:52:00 GMT

Over the course of 2022, we have witnessed extremes in grain markets. Ongoing conflict in Ukraine has removed 75% of that nation’s grain export capabilities. Ongoing hard seasons in North and South America have been unable to produce large enough quantities of grain and oilseeds to repair the world’s supply. This has created extremely volatile futures markets. This volatility is set to continue as the U.S. enters their summer growing season with a heat wave this week. Closer to home the BOM updated their outlook on June 9th calling for a wetter than average winter. Although, there are some growers who would like to see a dry spell.

Ukraine Update

It is estimated that Ukraine will finish this season with 30MMT of grain carry over as the conflict drags on and prevents exports. There are negotiations for a ‘safe grain corridor’ through the Black Sea. These are being led by Turkey. However, Russia has demanded any agreement should include lifting of sanctions. Although talks are ongoing, they do not appear to be making progress in the short term.

Early Heatwave for the U.S.

A widespread and early heat wave will take place through growing regions of the U.S. over the next 10 days. Temperatures are expected to be 5 – 10 degrees Celsius higher than normal. The market is hoping that the responsible ridge will shift towards the end of the month returning the Midwest growing regions to more normal temperatures.

BOM Update

In their June 9th update, the BOM called for above median rainfall for much of Australia. There are several weather patterns driving this. A persistent La Niña continues to feed easterly weather and warm the ocean waters off the coast of Northern Australia. A negative IOD in the Indian Ocean is forecast to develop. This leads to warmer waters off the coast of Australia and cooler waters towards India. This weather pattern improves the likelihood of weather systems hitting Australia in the northwest and moving through to growing regions in the east and south.

However, not all regions are currently looking for more rain. Growers from central NSW through to QLD have reported the inability to seed due to overly wet and boggy conditions. In some instances, small planes are being used to air-seed! However, the next fortnight should bring drier conditions as the BOM forecasts a dry spell before the above outlook takes shape.

We are also pleased to see that recent rainfall through South Australia and the Victorian Mallee has improved conditions slightly. We hope this pattern continues.

Overall, Australia continues to see excellent demand for grains and oilseeds as the conflict rages on in Ukraine. Market volatility is set to continue as the U.S. enters its summer growing season with unseasonably hot weather. Closer to home, the BOM is forecasting a positive season. However, this will need to verify over the coming months.

Indian Wheat Supplies May Not Save the Day

Thu, 12 May 2022 04:54:00 GMT

As the Black Sea conflict enters its third month, global consumers of wheat look to other producing origins to make up for the lost Ukrainian supply. Consequently, normal suppliers such as Australia, Europe, Argentina and North America have seen an uptick in demand. Interestingly, India has stepped in as an unlikely supplier to the world for its food needs. However, this supply may be short lived. La Niña driven weather continues to make for hard seasons in both North and South America. Australian growers commence their growing season in largely strong conditions; however, not all parts of the country are enjoying supportive wet weather.

Hot and hard finish in India

Indian wheat producers are currently in the harvest phase of their season. As they cut through the crop, the world watches to see how badly yield has been impacted by excessively hot and dry weather over March and April. A May 3rd article on cnn.com reported that northwest and central India had experienced its hottest April on record in 122 years of data keeping. The article went on to interview Gurvinder Singh, director of agriculture in Punjab…. “an average increase of temperature by 7 degrees Celsius had reduced wheat yields”. Mr Singh went on to state “because of the heatwave we’ve had a loss of more than 5 quintal (500 kilograms) per hectare of our April yield”. The USDA currently has India in for 10MMT of wheat exports to help alleviate the lost supply from the Black Sea. However, a hard finish to the season most likely means this is not realistic.

Ongoing Impact of La Niña

Through last harvest most weather analysts were predicting La Niña to subside. However, this has not played out. Over the months of March and April the Pacific Ocean weather temperature phenomenon strengthened with persistent cold waters off the western coast of South America. The impact of this has been a continuation of hot and dry weather in Argentina. The Rosario Grain Exchange currently estimates Argentine new crop wheat production at 19MMT which is down from 22MMT last season.

Crop Ratings in Kansas

Cold water off the coast of Baja, south of California, has also contributed to blocking patterns in the Southern Plains of the United States. In their last update, the USDA rated crop conditions in Kansas at 28% good to excellent vs a rating at this time last year of 53%. The current rating is likely to decline on account of hot and dry conditions presently in place.

Closer to Home

In their most recent update, the BOM is calling for a weakening of the La Niña pattern and strengthening of the negative IOD in the Pacific Ocean. If this occurs, the extremely wet weather being experienced in Southern Queensland and Northern New South Wales should normalise. Also, a negative IOD should improve rainfall in Western Australia, South Australia and Western Victoria. Although, most of the country is off to a positive start with soil moisture; there are many growers in South Western NSW, Western VIC and SA that are not experiencing an ideal start. We hope conditions improve for our neighbours in these areas.

We are pleased to report strong results for the Advantage program this year with month over month improvement of returns as strong demand for Aussie grain continues. Canola, wheat and barley pricing is all up markedly since harvest. Without an end to the conflict in Ukraine and ongoing weather risks in North and South America, this strong demand should continue and remain supportive to grain prices. Best of luck to everyone with the current sowing campaign!

Food Security Takes Centre Stage

Tue, 19 Apr 2022 04:37:00 GMT

The violence in Ukraine continues to dominate global markets as both sides settle into what could be a drawn-out conflict. President Zelensky continues to embody the grit of the Ukrainian nation while President Putin seems determined to annex portions of the country in both the east and south. Dryness in the Southern Plaines of the United States further threatens the outlook for wheat supplies in the 2022/23 season while India emerges as an unlikely exporter of wheat. High commodity prices have now become a political touch stone in both the east and the west with Sri Lankans taking to the streets to protest lack of food and fuel availability.

Ukraine Conflict

Over the last six weeks, the world has watched in horror as the Ukrainian conflict continues. Russian troops have retreated from the north of the country and their ambitions to take Kyiv. It appears the Russian military is now focused on the southeastern portions of the country which is wealthy in commodities including natural gas, coal and agricultural products. Bulk ocean exports have been replaced with road and rail exports to neighbouring countries such as Poland, Slovakia, Hungry and Romania. Albeit, at about 10% of the pre-conflict export pace. It is also worth noting that the Ukrainian government is now offering a farmer support by purchasing grain produce from local producers. As we have said before, we hope for a speedy diplomatic resolution to the conflict in Ukraine.

US Wheat Outlook

On April 5th, the weekly wheat crop condition ratings re-commenced after the winter dormancy period. Overall, US winter wheat was rated 30% good to excellent and 36% poor to very poor. This the worst ranking in decades and the market responded accordingly with futures up 10% since then. There is currently rain forecast for hardest hit Texas, Oklahoma, Kansas, and Nebraska. However, it is in the back-end of the model which we have all had frustrations with in the past.

Food Security

This week the IMF World Bank stated that they are concerned with food security and made an appeal to exporting nations to not restrict food or fertiliser exports. High agricultural commodity prices are having a severe impact on poorer nations. This week we saw Sri Lanka default on government bond payments and state they were keeping the funds for the purchase of food and fuel instead. This is following weeks of protests in the city of Colombo aimed at the president of the nation.

Closer to Home

Australian exports of wheat, barley and canola continue to advance at record pace offering good markets for grain across the country. With the Ukraine crises likely to continue longer than originally believed, it is expected this export pace will continue through the entirety of the season. Over the coming months, Australian producers will begin the new season with sowing. Much of the country holds good moisture with WA receiving rain in recent weeks. However, not all areas are as positive with farmers in Eastern SA, Western and Central Vic looking for a drink.