How Are Canadian Wheat Competitors Faring?
As combines are being put away for the season in Western Canada, they’re just starting to roll in the Land Down Undaa as the Australia wheat harvest starts up. That being said, first deliveries were being seen last week into Melbourne port locations for Australian Prime Hard wheat (APH3), which requires a minimum of 14% protein and is “ideally suited for high volume European breads, yellow alkaline noodles, fresh ramen noodles, dry noodles, and wonton skins” (so basically Asian markets).
With the smaller Australian wheat crop mentioned above in mind, and the drought conditions in Australia driving up feed prices, APH2 wheat prices delivered to Melbourne port locations were priced at nearly $334 USD / MT (or nearly $9.10 USD and $11.85 CAD per bushel). This a jump of 63% year-over-year.
Comparably, Australian Prime White wheat (APW) prices are also up significantly year-over-year, sitting now nearly 150% higher for the minimum 10.5% protein wheat. Specifically, delivered prices into Melbourne ports was sitting at $320.55 USD / MT ($8.72 USD or $11.35 CAD per bushel).
We need to keep in mind that these are eastern Australian port prices, where the drought has been most prevalent (Very clearly, they’re not FOB farm / interior origination prices). Keep in mind, however, that Australia wheat production for 2018/19 is somewhere between 18.5 MMT (USDA) and 16.53 MMT (ABARES’ most recent estimate as of Friday, Oct 26). The USDA also lowered Australia’s wheat exports by 1 MMT to 13 MMT in the October WASDE a few weeks ago but most private analysts have it pegged at somewhere between 11 and 12 MMT.
We’re seeing the effects though already today as Australian wheat exports are forecast to decline by 1 MMT to 12 MMT for 2018/2019. Notably, in the first 6 months of 2018, Australian wheat exports fell to 5.15 MMT, well below the same period in 2017. Notably, by their major markets, this is how it’s looking compared what half of the full-year export campaign was in year’s past.
Switching durum, in the October crop outlook update from Agriculture Canada, durum exports were lowered by 200,000 MT month-over-month to 4.6 MMT. The drawdown was mainly because Kazakhstan and EU durum are being competitive, albeit the quality of this year’s harvest in the EU is a bit questionable.
Sidenote: back in June for our GrainCents readers, we looked more extensively at the Kazakhstan durum market. At the time, a 525,000 MT harvest in Kazakhstan for 2018/19 was expected, down 45,000 MT year-over-year thanks to a drier spring. As such, durum exports were expected to fall 11% year-over-year to about 400,000 MT. This is significant because in 2017/18, Kazakhstan shipped over 240,000 MT to Italy!
Coming back to the global picture, the 2018/19 world durum harvest is expected to total 37.5 MMT as per the International Grains Council. Worldwide carryout from 2017/18 was lowered by 200,000 MT to 9.8 MMT so total available global durum supplies for the 2018/19 crop year are sitting at 47.3 MMT. Conversely, total global durum demand was raised by the IGC by 300,000 MT to 37.5 MMT, thanks to more food interest. This means that 2018/19 carryout will stay flat year-over-year at 9.8 MMT.
Based on current estimates from the AAFC and USDA, combined Canadian and American carryout should account for 28.5% of this, with 2.8 MMT carrying over into the 2019/20 crop year.
While we are cognizant of the late harvest in the Canadian Prairies, we still have to be cognizant of what other markets are doing.
President & CEO | FarmLead.com