'Increased competition' to curtail Australian wheat export growth


"Increased competition" is to prevent Australia's wheat exports matching the ongoing harvest in setting a record, officials said, although proving more downbeat on domestic price prospects for barley and canola.

Abares, the official Australian commodities bureau, hiked by 4.1m tonnes to 22.4m tonnes its forecast for the country's wheat exports in 2016-17, on a July-to-June basis, citing the boost to supplies from a record harvest.

The bureau last week lifted by nearly 4.6m tonnes, to an all-time high 32.6m tonnes, its forecast for Australia's wheat production this season, thanks to "favourable seasonal conditions" which have "supported above-average to exceptional yields in much of the Australian cropping region".

However, the export forecast, while representing a jump of 42% year on year, remains below the record of 24.66m tonnes set in 2011-12.

It is also below a forecast of 23.0m tonnes revealed by the US Department of Agriculture on Friday, in its flagship monthly Wasde briefing on world crop supply and demand.

'Increased competition'

Abares said that "volume exported in 2016–17 is less likely to reach that [2011-12] record because of increased competition due to global availability of large exportable supplies".

While most major wheat exporters "are forecast to have ample supplies available for export… total world imports are expected to remain largely unchanged".

The bureau also upgraded its forecasts for exports from the likes of Kazakhstan, Canada and Ukraine, and said that Russian shipments "are expected to gain momentum" after a "slower-than-expected start", offsetting reduced expectations for EU shipments.

Meanwhile, for imports, Abares forecast that in sub-Saharan Africa purchases will "fall in 2016–17 and by as much as 30% in South Africa and Ethiopia," after record  imports last year thanks to poor domestic harvests.

This will offset increased import expectations by the likes of India, which Abares forecast would buy-in some 3m tonnes – an estimate made before the country last week ditched a 10% import tariff in the face of elevated domestic prices following a disappointing harvest.

Milling vs feed

Among Australia's own major wheat customers, demand prospects looked "mixed", Abares said, citing in particular a preference for milling wheat.

"Indonesia is expected to increase wheat imports for human consumption but to reduce overall wheat imports because of decreased feed wheat demand.

"China and India are expected to increase milling wheat imports to supplement poor quality domestic harvests."

'Pressuring prices'

Although Abares stopped short of releasing an estimate for Australian wheat stocks, its estimates imply a large increase in inventories, as forecast by the US Department of Agriculture.

Australia's exportable wheat supplies "are massive because of a record crop", the USDA said on Friday.

"Despite higher exports and domestic consumption, stocks will continue to grow, augmenting the already burdensome global stocks and pressuring prices."

Price outlooks

Nonetheless, Abares itself stood by expectations of Australian wheat prices, as measured by pool returns of premium white wheat, averaging Aus$260 a tonne this season, albeit a figure down 14.2% year on year.

Its estimate for world wheat prices, as measured by hard red winter wheat values at US Gulf ports, was nudged $2 higher to $166 a tonne.

However, Abares did downgrade domestic price prospects for barley, now seen averaging Aus$179 a tonne in Geelong for feed, weighed by a harvest now seen soaring 24% year on year to a record 10.6m tonnes.

And for canola, the bureau cut its forecast for Melbourne prices by Aus$22 a tonne to Aus$533 a tonne, ditching expectations of a rise in values this season.


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