Australian Wheat Production Forecasts in MY 2022/23 Will Benefit Asian Markets

Wheat

Australia

Published Oct 31, 2022

Australia has been showing some promise in the global wheat market. In MY 2022/23 (October-September), Australian wheat production will be the second-highest production compared to last year's record harvest of 36.3 million mt. However, prolonged wet weather and excessive rainfall in Australia may threaten crop quality. Despite the concerns over the quality of the crop, Australian wheat will be crucial for the global supply chain if the grain corridor program, which is a key source of wheat from the Black Sea region, expires in November. As the global market seeks to make up for the reduced volumes from the EU and Argentina this year, buyers in Asia may benefit from Australia's wheat harvest. Helping to offset the shortfall in the global supply and demand dynamics.

Australia's wheat harvest is anticipated to get started in the week starting 31st October. Australia‘s Bureau of Agricultural and Resource Economics and Sciences forecast wheat production to be 32.2 million mt in MY 2022/23 (October-September), while USDA predicts Australian wheat production at near record levels to 34 million mt in the MY 2022/23 (October September). This is the second-highest production of Australian wheat compared to last year's record harvest of 36.3 million mt.

Rainfall and improved weather conditions have generally surged Australia's wheat harvest prospects, which will supply sufficient soil moisture for grain fill and support a total national wheat crop due to ideal flowering. However, if the rainy weather persists, it could harm crop quality. Australia’s Bureau of Agricultural and Resource Economics and Sciences lists waterlogging as the main possible threat to wheat production as a result of the third consecutive La Nina event.

Despite concerns about the crop’s quality, Australian wheat will remain important for the global supply chain if the grain corridor program, which is a key source of wheat from the Black Sea region, expires in November. It is worth noting that Ukraine has already exported 9 million tons of grain, primarily wheat and corn, since the contract was signed. However, there are doubts over whether the Ukrainian wheat supply will be sufficient enough to meet importers' demand and the uncertainty of the upcoming months.

Demand has begun to rise as a result of growing concerns over the grain corridor deal coupled with Australian wheat ample supply. Australian wheat is a potential alternative source of wheat supply.

Source: Trademap

According to Trademap, Australian wheat exports' major destinations are Asian countries. China as the one of emerging markets significantly increased wheat imports from Australia by 330% YoY to USD 1.3 billion in the first seven months of 2022. It is expected that in the first ten months of 2022 China will import 5.3 million mt of Australian wheat, up by 231% YoY in terms of volume. The Philippines is also to import 2.4 million mt of wheat from Australia in the first ten months of 2022, up by 33% YoY.

In Argentina, dry weather has hampered the sowing of wheat. In MY 2022/23, it is predicted that Argentine wheat production will decrease by 16% to 19 million mt. The same trend will occur in the EU, particularly France, which projects wheat production to decrease in MY 2022/23 due to hot and dry weather. Australia is one of the alternate markets to ensure adequate global wheat supply. As the global market seeks to make up for the reduced volumes from the EU and Argentina this year, buyers in Asia may benefit from Australia's wheat harvest. Helping to offset the shortfall in the global supply and demand dynamics.