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Australia wheat exports poised to deliver $6b windfall

Australian grain is flying off farms regardless of China’s trade sanctions, and wheat shipments alone are set to hit 4 million tonnes in December.

A whopper wheat crop, now predicted to be Australia’s biggest ever, could reap $6 billion in export earnings as grain flows back into traditional and rarely accessed markets.

While a flotilla of coal-carrying vessels sits in limbo off China, the action will be non-stop at Australia’s grain port terminals well into 2021.

Australian grain is being helped by doubts about supply out of Russia, where the government is trying to control domestic inflation by slapping a $US25 a tonne tax on grain exports.

GrainCorp port terminals that gathered cobwebs last year are now booked solid through to August-September.

It is a similar story for the operators of port terminals from Newcastle in NSW all the way around Victoria, South Australia and Western Australia as shipping slots are gobbled up by hungry grain traders and marketers.

The export program includes about 1 million tonnes of wheat bound for China over the coming weeks.

It is understood some grain traders, particularly multinationals operating in Australia, did not support the Morrison government’s decision to appeal against China’s 80.5 per cent barley tariffs to the World Trade Organisation.

Nearly all have refused to endorse Australia’s WTO appeal out of concern about reprisals, despite most farmers supporting the move.

Grain industry experts are tipping the harvest will wind down to produce 34-35 million tonnes of wheat and about 13 million tonnes of barley.

If so, it will be the biggest wheat crop Australia has grown and the second biggest barley crop. It also puts Australia on track to export about 22 million tonnes of wheat and 7 million tonnes of barley by September 30.

CBH marketing and trading boss Jason Craig said Australia was exporting from nearly all ports, something it had not done since 2016-17. He said it was price competitive into most overseas markets.

“We are going to places, East Africa for example, where we haven’t been since 2016-17,” he said.

“There has been strong selling and Australia is very competitive in the marketplace for wheat, barley and canola.

“People are covering their requirements as supply out of the Black Sea has been a little uncertain and that is encouraging people to come back to Australia.

“In particular you are seeing south-east Asia returning to Australian grain as their base. We would expect that for the majority of next year.”

Russian tax
Wheat sales into Indonesia, the Philippines, Vietnam, Japan and South Korea are strong and the Middle East has emerged as the biggest buyer of barley in the absence of China.

There is also the prospect of stronger wheat prices for Australian farmers as Russia is set to impose its tax from February through to at least June.

The benchmark wheat price at Kwinana in WA has already climbed from $300 a tonne on December 9 to $315 a tonne following the doubts about Russian exports.

Egypt bought wheat this week at a higher price than its last tender after no Russian wheat was offered for sale.

Emerald Grain chief executive David Johnson said there was strong demand for Australian wheat and barley across markets in Asia, the Middle East and the east coast of Africa.

“The shipping stem [port terminal capacity bookings] in Australia is being populated very rapidly,” he said.

“It is good for everyone. The cupboard was bare coming into this season after two years of well-below-average production.

‘The best crop we have ever grown’
“In NSW and parts of Victoria and South Australia, we keep hearing comments like ‘this is the best crop we have ever grown’. The NSW crop is phenomenal.

“The prices growers are getting at the moment are historically average but with the yields they are getting, they’re selling their grain pretty aggressively and locking in the price.”

The one state that has largely missed out is Queensland, where capacity at three GrainCorp port terminals is going begging.

There is almost no shipping capacity available at GrainCorp’s four other terminals in NSW and Victoria. Shipping capacity at Newcastle is booked out until August, there are just three shipping slots left at Port Kembla to the end of September, there is nothing available at Geelong for the next nine months and there are only four slots left at Portland.

A GrainCorp spokesman said: “We’re pleased to see our customers supporting our shipping stem on the east coast of Australia off the back of a great harvest and at this stage, we’ll be busy until late 2021.”

CBH’s four port terminals in WA are booked to near capacity till March and slots for later in the year are filling up rapidly.

Glencore-owned Viterra, which dominates port terminal ownership in South Australia, expects 1.8 million tonnes from that state to hit export markets by end of January.

Viterra chief operations officer James Murray said 25 different buyers had already bought grain from this harvest, many directly from growers.

“This includes 11 exporters with bookings over the season sending barley, wheat, canola and pulses to multiple international destinations,” he said.

CBH chief executive Jimmy Wilson said this week that the co-operative controlled by thousands of WA farmers was happy to support whatever decision the government made on the WTO barley appeal.

Viterra, GrainCorp and ROC Partners-owned Emerald were among those who declined to make any comment on the appeal.
Source: Australian Financial Review

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