Australia is currently harvesting a new record-breaking wheat crop for the 2022-23 marketing year, with around 80% already completed and the rest to be harvested in the next few weeks, local sources told Fastmarkets Agriculture.
The harvesting update comes after the weather appeared to be favorable for most of the country despite concerns raised months ago over excessive humidity levels.
Wheat yields in Western Australia improved in December, driving the record crop, with other states also showing good results, while New South Wales (NSW) is listed as the only underperforming area.
Altogether, however, the yields are better than expected and the crop is estimated to reach up to 40 or even 41 million tonnes, local sources added, which would surpass the official 36.6 million tonnes the agriculture ministry and the US Department of Agriculture (USDA) estimate.
Logistic issues to challenge exports
Yet, sources remain skeptical about a significant increase in export potential amid the new record wheat crop, as the logistics chain has been working at close to full capacity for the past few years.
Larger investments and developments must therefore be made to improve logistics to increase Australia’s wheat export potential, sources told us.
“The harvest is going well but the southern regions likely have several weeks left [in order] to complete,” a source said, adding that the crop quality has been “better than originally expected” but that the protein profile remains lower than usual.
“We are expecting 40-41 million tonnes, but some crops have not yielded as well as they looked,” the source said, adding that the export potential would be around 28 million tonnes, slightly higher than last season.
“The number really means very little because we can’t move it out of the country – our logistics chain becomes full at 35 million tonnes, so anything more is just stuff that can ship in September, October, or November (if that), [which] of course impacts the balance sheet overall but doesn’t make the grain more available from Australia for the next six-nine months,” a second source said.
The marketing year is usually due to close in September, but even though the new season starts in October, new volumes are not expected to reach silos until December.
In the 2021-22 marketing year, Australian wheat exports reached a record 27.5 million tonnes, with record monthly volumes of 2.8 million tonnes reported for wheat and 4.2 million tonnes for all agricultural products, meaning that the country’s overall maximum port capacity is closer to 50 million tonnes per year.
For several years, industry participants have been considering investments into the logistics chain that could help the flow of wheat both inside and outside the country, as this year revealed the railway system’s sensitivity to weather, particularly excessive rain.
Sources say that the Australian government instead has so far shown little interest in investing.
“Our rail network is old and needs investment, but in the modern era more freight moved by road and rail infrastructure has been neglected,” the first source said.
“We don’t really have the volume to support bigger investments and the current scenario road freight is much more expensive versus rail,” the source added.
Logistics chain problems continue amid fears of drought despite Australia’s significant production increase over the last few years, with hopes from the industry that if export margins remain strong, more state investments could follow.
Meanwhile, private investors have been trying to improve the situation, with CBH Group – Australia’s biggest local operator – adding loading capacity in Western ports with plans to also invest around $4 billion for the next ten years in the co-operative’s network grain receiving, storage, and out loading infrastructure and assets, taking monthly export capacity to 3 million tonnes by 2033 or sooner.
