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On December 9th, foreign media reported that Australian wheat prices fluctuated more in November, as the competitive bearish pressure on Argentine wheat prices and the lack of strong demand suppressed the bullish sentiment caused by adverse weather during the Australian harvest and lower than expected protein levels in Western Australian crops.
Rainfall hinders Australian wheat harvest
The rainfall in the second half of November has delayed field work, especially on the east coast, as market participants are waiting for drier conditions to resume harvesting and assessing the potential quality damage caused by untimely rainfall.
The duration and intensity of rainfall have intensified people's concerns about the possibility of serious quality damage to crops.
Sources in Victoria state say that mold and vomitoxin may not be the real problem, but it will be a matter of testing weight and numerical decline, adding that crop protein levels are unlikely to be significantly affected.
Western Australia has also experienced harvest delays caused by rainfall, but compared to the East Coast, the rainfall is lower, coupled with warmer weather, allowing fields to dry out faster and resume harvesting. It is expected that the winter crop harvest in the state will not be significantly delayed.
The start stop harvest has led to a decrease in the liquidity of quotations in the second half of November, and the continued uncertainty of crop conditions is also considered a contributing factor. An Australian trade source said that about half of the harvest in Western Australia has been completed, and so far, more than half of the crops are Australian standard white wheat grade and below. The average protein content seems to be lower than initially expected, but as the harvest moves southward, we do expect to see higher protein levels, making it difficult to determine prices and price differentials. An Australian trader said that Western Australia harvested 65% of its wheat, and growers reported seeing more low-grade and substandard wheat.
On November 29th, the estimated prices of Australian premium wheat and standard wheat were $262/ton and $248/ton, respectively.
The rise in corn prices stimulates the purchase of feed wheat
The optimistic harvest prospects in the southern hemisphere have put pressure on wheat, coupled with the rise in feed corn prices in the first half of November, which has driven procurement activities for feed wheat in Asia in early November. Vietnamese buyers have entered the Brazilian feed wheat market, while feed processors in the Philippines have increased their purchases of feed wheat for the February shipping schedule in Australia. Due to dissatisfaction with the price, South Korean feed buyers have postponed their purchases for several weeks. Last week, they booked four batches of feed wheat from the end of December to January, which are likely to be shipped from the western United States.
With the decline in corn prices, the price difference between feed wheat and corn has widened, resulting in a decrease in demand for feed wheat in the second half of November. Filipino buyers are adopting a wait-and-see attitude as they expect the price of feed wheat to further decline after rainfall affects the harvest on the east coast of Australia.
In contrast, the demand for flour milling wheat is stable, and some flour mills, especially those in South Korea, take advantage of the post election exchange rate fluctuations and the downward trend of wheat to purchase North American wheat. Most flour processing factories in South Korea have already met their demand before the Spring Festival in January. In addition, the increased supply liquidity and competitive prices of Argentine wheat flour have suppressed demand for Australian wheat flour flour. Sources predict that by early 2025, Argentine wheat prices in the Southeast Asian market will remain competitive.
In November, China will continue to purchase wheat and barley from the international market, with shipments scheduled for 2025, although this will have little impact on global price fluctuations. A joint report by the Ministry of Agriculture and Rural Affairs of China and the National Agricultural Technology Extension Service Center emphasizes that major winter wheat producing areas have experienced ideal weather during the planting season. However, people are concerned that a large proportion of seedlings grow faster than ideal levels, as this may increase the likelihood of wheat crops suffering from cold damage in winter.
Market Focus on Argentina's Wheat Export Potential
Market participants are still waiting for the resumption of harvest on the East Coast to assess the potential quality damage caused by recent rainfall, which may convert a large amount of flour grade wheat into feed grade quality.
With the approval of importing Argentine wheat to China, the market will closely monitor Argentina's potential to replace Australia's market share in China and other parts of Asia, especially considering the competitive price of Argentine wheat and the possibility of lower protein levels in Australian crops this season.