The Australian Bureau of Agricultural & Resource Economics and Sciences (Abares) expects the wheat crop in the country to come in an additional 10% higher than expected. This brings the harvest close to the record from the 2016/2017 season. The total harvest of winter cereals is therefore considerably higher than last season.
According to the statistics office, the Australian wheat harvest for the 2020/2021 season will amount to 31,1 million tonnes, an increase of 10% compared to the September estimate (28,9 million tonnes). The favorable rainfall in recent weeks is the main cause of this. "The rainfall was perfectly timed for the crop's growth cycle," the agency said. The harvest is therefore inching closer to the record year 2016/2017, when production amounted to 35 million tons of wheat. The total harvest of winter grains increases to 51,5 million tons, an increase of 76% compared to last year.
Are high prices coming under pressure?
The fact that another increase in wheat production is expected could have a negative effect on prices. Last month they were at their highest point in 6 years. Last week, prices for growers have already dropped by around $7,50 per tonne, so that the price of wheat, converted into US dollars, is currently around $241 per tonne. However, the stronger Australian dollar has been the main reason for the decline so far and not Abares' harvest forecast.
It is therefore questionable whether the large harvest will actually have an effect on prices. This is because the demand for Australian wheat is still good, although the limited port capacity is seen as a problem for the first quarter of 2021. The majority of demand comes from Africa, which means that wheat competes heavily with product from the area around the Black Sea. Prices there are now considerably higher: around $254 per tonne.
Negative outlook in barley market
Expectations for Australian barley production have also been increased from 11,2 million tonnes to 11,9 million tonnes. However, the prospects for those growers are less positive. China has imposed an import duty of 80,5% on Australian barley, because the country suspects that barley is being dumped on the Chinese market at bargain prices. China has been Australia's most important market for barley for many years. More than $1 billion worth of product goes here every year. China is still considering challenging this tariff at the World Trade Organization (WTO).