Rabobank Lowers Bar on Australian Wheat Export Prospects

(Agrimoney) – Rabobank lowered the bar on forecasts for Australian wheat exports, and canola output, as it highlighted the setback from frost, as well as dryness, to crops.

The bank pegged at 20.9m tonnes Australia’s ongoing wheat harvest, a drop of some 14m tonnes year on year and a result which would be the weakest in a decade, but a figure not far from those released by other commentators.

The US Department of Agriculture estimates the harvest at 21.5m tonnes, and the International Grains Council sees a 20.5m-tonne figure, while Abares, Australia’s official crop bureau, has put the crop at 21.6m tonnes, but said that a downgrade is in the offing.

However, on export prospects Rabobank came in below other commentators, despite concurring on the prospect for stocks left over from last year’s record harvest to underpin volumes.

‘Really had a detrimental impact’

Wes Lefroy, agricultural analyst at the bank, said that that while the “export surplus would be somewhat supported by high carry-over stocks” was “expecting 17m tonnes of wheat to be available for export in 2017-18”.

That compares with an Abares forecast of 18.15m tonnes, a USDA figure of 18.0m tonnes and IGC estimates of 19.0m tonnes on a July-to-June basis, or 17.6m tonnes on an October-to-September basis.

Mr Lefroy flagged weakened production prospects in many major exporting states, including top-ranked Western Australia, where the wheat crop was pegged at 7.9m tonnes, some 1m tonnes below the average level.

In New South Wales, the second-largest wheat growing state, wheat output was seen falling nearly 60% year on year to a 10-year low of 4.7m tonnes, “with much of the state failing to receive meaningful rainfall until October – which was too late for many”.

Nonetheless, he added that in the state “it is the frost that has really had a detrimental impact, with some producers reporting crop losses of 80-100%”.

In Victoria, by contrast, some areas “have experienced one of their best years in recent memory, with early October rains shoring up yields”.

East/south divide

The export figure comes at a time of notable uncertainty over Australia’s wheat shipment prospects, given regional supply differences.

In eastern areas, near major urban areas and centres of livestock production, “eastern port pricing seems to have no intention, and perhaps no need, to fall to export levels”, said Tobin Gorey at Commonwealth bank of Australia.

“Prices at southern ports, where grain supply is more plentiful, are at export levels.”

‘Hit hard’

Rabobank also pegged the Australian canola harvest at a seven-year low of 2.6m tonnes, saying the crop had “been hit hard” by the poor weather.

That compares with a USDA forecast of 3.0m tonnes, and an IGC estimate downgraded last week to 2.7m tonnes, with the council saying that “although there was a reported improvement in some crops in Western Australia owing to wetter, cooler weather during September, it was likely too late for most canola fields.

“Accordingly, [Western Australia] production could be more than 40% lower year on year, at 1.3m tonnes, on heavily reduced yields.”

Abares forecasts the domestic canola crop at 2.75m tonnes, down from 4.14m tonnes last year, and sufficient to support exports of 2.04m tonnes in 2017-18, a drop of 43% year on year.