NSW Department of Primary Industries

Wheat

  • GVP $4.16 billion est. Up 541% yoy.
  • Record production of 13.1 million tonnes.
  • Wheat exports rebounded strongly, valued at $1.42 billion.
A positive divergence of seasons in contrast to the previous three years set up the wheat crop nicely for record production, underpinned by historic average yields of 3.45 tonnes/ha. The increased supply meant that prices retreated from drought level peaks, to a still relatively healthy global price parity level, supported by strong feed grain demand within the broader grain sector. Combined with the large production, this set up a record GVP for the industry valued at an estimated $4.16 billion.

The Perennial Artisan Grains Workshop

Researchers from DPI’s Pastures Unit held The Perennial Artisan Grains Workshop in Cowra. Featuring international guest speakers and attendees, the event was hosted by Matt Newell & Richard Hayes and brought together sectors of the industry supply chain to examine possibilities for new perennial grain crops in Australia.

This hybrid event was supported by NSW DPI and Agrifutures Australia, and brings together researchers, millers, bakers and brewers to make an assessment of the functionality of selected perennial grains. This workshop is another piece in the puzzle examining the role of perennial cereals in Australian cropping and livestock production systems, to deliver enhanced soil, water use and environmental outcomes, along with productivity benefits.

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Wheat field

Assessing vulnerability of key broadacre crops to climate change

Climate change is altering the growing conditions for agricultural commodities including broadacre crops. The viability and growth of broadacre cropping will depend on the industry's response to higher temperatures, more extreme weather events, and shifts in rainfall patterns.

The NSW Department of Primary Industries (DPI) is undertaking a detailed analysis of the risks and opportunities of a changing climate to support resilience and adaptation in the broadacre cropping sector.

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DPI employee holding wheat in a field

Production

Wheat Production & Yield

  • Production 000 tonnes
  • 10 Year Moving Avg Production 000 tonnes
  • Yield tonnes/ha
Download data (.XLSX)
Source: ABARES (2021)
Wheat was the largest commodity beneficiary of the substantially improved seasonal conditions, with a strong early autumn break providing the chance for most cropping districts to sow in optimum planting windows. As a result a total of 3.8 million hectares was planted, a 78% increase year on year. 4

As the season progressed some regions began to experience below average rainfall, particularly in the south and south western cropping regions. Due to the strong early start to the season, crops were partly able to compensate with stored moisture reserves over the cooler months. Northern parts of the cropping belt received timely rainfall to finish crops, and managed to avoid heavier rainfall than some of the southern cropping districts experienced towards the end of the season. Some southern regions were subject to lower yields and pre harvest quality downgrades, although this was offset by record average yields and ultimately production of 13.1 million tonnes. This represents a 25% increase on NSW previous record year of 2010-11, and the largest crop of all state jurisdictions on record. 4

In contrast with the recent drought impacted wheat crops, the crop on the northern half of NSW was generally higher yielding and generated the larger production volumes than the southern parts of NSW.

Price

Domestic prices for wheat have come off from the highs experienced over the duration of the drought and again reached parity with global prices. For the first time since the drought began, global wheat prices (excluding basis) exceeded domestic prices in April 2021 as the large Australian crop that was produced in 2020 resulted in a significant exportable surplus to compete in global markets. 81 170

Since the drought began and through the more conducive recent local growing conditions, US wheat futures have continued to rise steadily to reach levels around $300/tonne or greater for most of the Australian wheat marketing period. This has supported local prices at above average levels and helped to generate increased business returns over the large wheat crop. Global prices are being supported by increased demand stemming from the feed grain sector and across a range of cereal commodities including Maize, despite record global production. 207 195

The strong domestic prices are also impressive considering a firmer exchange rate for the fiscal year. The Australian dollar increased to sit above 70 US cents for the entire year, averaging 74.92 US cents for the second half of the year, thereby eroding wheat export prices relative to last year. 178

Wheat Futures Versus Domestic Port Prices

  • H2 Wheat (Del. Sydney)
  • CME Futures (#1 Front Month)
  • Approx. Drought Duration
Download data (.XLSX)
Source: QUANDL (2021) , DPI (2021) , RBA (2021)

Trade

NSW Wheat Export Markets

  • 2020-21 Exports
  • 10 Year Avg. Exports
Download data (.XLSX)
Source: GTA (2021)
The drought in NSW severely impacted the previous seasons exportable surplus, with the past two seasons seeing some of NSW smallest export programs in recent times, however the large crop in 2020-21 meant that excess supply was able to be diverted to export markets. Wheat exports reached $1.42 billion, which is an increase of 93% on the 10-year moving average in value terms. 128

The NSW wheat export program was much more concentrated in the states top four markets of China, Vietnam, Italy and Indonesia, than compared to the 10-year average levels. All four of these markets were worth in excess of $150 million, while there was also concentration of exports in medium size markets at the expense of traditionally smaller markets compared to the 10-year average.

Global wheat imports to China grew by 97% year on year due to increasing Chinese domestic feed grain prices, including for Maize which started to climb around April 2020. 207 121 Chinese domestic maize was trading at a price premium of $70/tonne to imported maize in September 2020, leading to increasing import prices for both maize and wheat as a feed grain substitute. 121 Feed grain demand to support the pork herd rebuilding effort has supported the market, while the Chinese government are likely also using the opportunity to replenish government reserves with imported grain.

Macroeconomic Conditions

Global wheat production was estimated at a record 775.8 million tonnes, however global consumption grew at a faster rate of 4.8% to reach an equally impressive record of 777.3 million tonnes. This resulted in the stubbornly high stocks to use ratio falling to 37%, and global ending stocks dropping by 3% to 288.8 million tonnes. 207

China continued to hold a vast share of global ending stocks, equivalent to 49% of global ending stocks. The volume of Chinese wheat stocks declined by 39%, while total Chinese consumption rose by 19% which is mostly due to a significant increase in feed grain demand to support the pork herd rebuild. 207 Chinese demand for wheat reflects an overall increase in demand for feed grains, primarily Maize, which is resulting in grain substitution and supporting global wheat prices. 195

Australian farmers have also benefitted from newly government imposed export taxes on Russian producers aimed at curbing Russian food price inflation. Old crop was charged a €50/tonne fixed tax, while a new floating export tax came into effect as of June to the value of 70% of the difference between the market benchmark price and the base government price of US $200/tonne. The result has been less competitive Russian wheat exports benefitting the very large Australian wheat export program. 122

Global Wheat Production, Consumption and Ending Stocks

  • China Ending Stocks
  • ROW Ending Stocks
  • Domestic Consumption
  • Production
Download data (.XLSX)
Source: USDA (2021)

Outlook

Harvesting wheat
Global wheat production is forecast to climb marginally by 0.6% to a new record level of 780.3 million tonnes in 2021-22. 207 Global wheat consumption is also forecast to reach a new record, rising to 780.3 million tonnes and receding global ending stocks of 283.2 million tonnes. 207 Market participants will be watching the Chinese pork rebuild with interest to gauge whether the recent levels of feed grain demand can be maintained to support prices over the next twelve months.

Australian production is forecast to decline marginally by 2% to 32.6 million tonnes, as Eastern Australian conditions at planting time resulted in less area being planted compared to the previous season. NSW production is currently pegged at 11.1 million tonnes, the second largest on record behind 2020-21, although growing season rainfall has been above average for most of the NSW cropping zone, with potential upside to yield forecasts likely leading into harvest provided soft conditions are sustained. 4

www.dpi.nsw.gov.au