Australia cut its crop export forecasts, hacking by more than 1m tonnes its expectation for coarse grain shipments, citing factors from “strong competition” in wheat trading to Chinese corn subsidy reforms.
Abares, the official Australian commodities bureau, cut by 580,000 tonnes to 16.95m tonnes its forecast for wheat exports from the southern hemisphere’s bigger shipper of the grain in 2015-16, on a July-to-June basis.
The downgrade reflected in part the cut to the country’s production prospects announced last week, with the bureau restating the setback to crops from “generally unfavourable” spring conditions, notably below-average rains and above-average temperatures.
However, the bureau also highlighted reduced sales to the key North Africa and the Middle Eastern wheat import markets – which had accounted for just 13% of Australian shipments in the July-to-September quarter, compared with a full-season average of 26% in the decade to 2013-14.
Abares noted “strong competition from exporters in the Black Sea region and the European Union, where supplies of wheat for export are expected to be plentiful”.
It also flagged the prospect of enhanced rivalry from US supplies in the South East Asian market, which typically views Australia as its default supplier, but which thanks to low shipping rates has come into range for more distant origins.
“Exporters of Australian wheat will face increased competition in 2015–16 [in South East Asia] from an expected rise in US wheat exports to the region, despite an overall decline in US wheat exports,” the bureau said.
“Australian wheat exports to China will also face strong competition from US wheat exports.”
US exports to Asia
The comment reflects rare upbeat comment on US wheat shipments, which the US Department of Agriculture foresees falling to a 24-year low this season.
However, US exports to China, at nearly 460,000 tonnes so far this season including sales yet to be fulfilled, are running well ahead of the 205,000 tonnes or so a year ago, according to USDA data.
US export commitments to Thailand too are, at 379,000 tonnes, running 79% ahead of last season’s pace, although to Indonesia, volumes so far are, at 193,000 tonnes, half those of a year ago.
Abares, noting that wheat crops in many parts of Australia have shown “high screenings and low protein levels”, cautioned that its wheat export figure might yet be downgraded further “if overall crop quality is worse than expected”.
However, it focused bigger downgrades to export expectations on coarse grains, for which it slashed its forecast for shipments by 1.03m tonnes to a three-year low of 7.18m tonnes.
The downgrade reflected expectations of lower shipments to China – with a cut by some 130,000 tonnes to 968,000 tonnes in the forecast for sorghum exports down to lower prices of corn, a rival in livestock feed, after Beijing cut subsidy levels, besides the extension of an import permit system to the red grain.
“Importers in China hold large stocks of grain sorghum and are expected to reduce imports over the remainder of 2015–16, compared with 2014–15.”
For barley too, lower Chinese demand was behind a cut of 800,000 tonnes, to 5.8m tonnes, in the Australian export forecast.
“Australian barley exports to China remained strong in the first quarter of 2015–16, but this was largely the result of importers fulfilling existing contracts,” Abares said.
“Many importers in China hold large reserves of barley and are expected to reduce barley imports over the remainder of 2015–16, compared with 2014–15.”
Abares also cut its forecast for Australian canola exports in 2015-16, by 220,000 tonnes to a five-year low of 2.11m tonnes, citing reduced production prospects, but also with China a main market affected.
“Australian canola exports to China are expected to decline by around 50% in 2015–16 to 250,000 tonnes because of a forecast fall in supply of canola available for export, an expected fall in import demand from China and relatively strong canola exports from Canada, China’s main supplier of canola.
“In the first quarter of 2015–16, Canada exported 1.1m tonnes of canola to China and no exports were recorded from Australia.”