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Australian wheat prices plunge on the back of ample supply

July 27, 2020

1 mins read

Australian wheat prices plunged to 240.8 USD/MT (-13.8%) on 8th July from 279.3 USD/MT recorded on 13th May, on the back of anticipated higher production for the 2020/21 marketing year. According to market participants, purchase of Australian wheat has been low as most buyers wait on the new crop which is expected to hit the market in October. According to the USDA, Australia is forecast to produce 26 million tonnes of wheat in 2020/21, which is a significant increase of 10.8 million tonnes from the previous season.

The increase in output is a result of favourable weather conditions across most of Australia's major wheat producing areas and an increase in planted area with above-average yields expected in Victoria, eastern South Australia and parts of New South Wales.

In addition, the domestic consumption of wheat is forecast to fall to 7.05 million tonnes in 2020/21 (-16%) from 8.4 million tonnes in 2019/20, largely due to a projected decrease in animal feed demand, thus setting a further bearish trend.

Australian feed wheat consumption is expected to drop sharply by 28.6% y-o-y in 2020/21, to a total of 3.5 million tonnes. After two years of drought impacting much of the beef cattle industry, improved weather conditions since early 2020 have boosted pasture production and lessened on-farm feed demand. Moreover, the widening price gap between wheat and barley, especially after China imposed a hefty tariff on Australian barley is likely to impact wheat consumption in feed ratios. Wheat is generally a favoured grain to include in animal feed, over barley, but according to market participants the increased price gap has resulted in many sectors switching almost entirely from wheat to barley.

Topics: Grains & Feed
Alana Barros
Alana Barros

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