Australian wheat inventory levels are projected to surpass those of last year by the end of the current season. This increase is primarily attributed to dwindling demand from China and heightened competition from Russia, the dominant global wheat exporter. Analysts and traders suggest that a significant reduction in wheat prices may occur as Australia attempts to move stored grains in what could be characterized as a fire sale before the new harvest arrives in the final quarter of the year. Currently, benchmark Chicago wheat futures are already trading near their lowest levels since 2020 due to an oversupply in the global market.
Data highlights a substantial decrease in Australian wheat shipments to China, which fell to just 546,000 metric tons between October and March. This figure contrasts sharply with the 2.9 million tons exported during the first half of the 2023/24 marketing season and the 4.4 million tons in the same timeframe in the previous year. Despite the typical pre-harvest lull in exports during the second quarter, Russia has maintained robust shipping activity. As the next Northern Hemisphere wheat harvest, including that of Russia, approaches, an influx of inexpensive grain could further limit Australia’s export opportunities.
Analysts warn that if the current pace continues, Australia may see carryover stocks reaching between 5 to 6 million tons from last season’s crop. Such build-up of inventory could force prices down to A$300 per ton from the current A$325 to A$350. Overall, Australia’s wheat production is expected to fall between 28 million and 34 million tons this year. Although this figure is a decrease from last year’s 34.1 million tons, it remains well above the ten-year average.
Chinese demand seems stagnant, with only a few small shipments booked recently, further complicating the market landscape for Australian wheat exporters.