Australia's 2022-23 wheat acreage seen lower, but favorable weather may help: analysts

Wheat acreage in Australia, the sixth largest producer globally, is likely to shrink in the upcoming marketing year 2022-23 (October-September) due to rising input costs, analysts told S&P Global Commodity Insights.

A likely drop in the wheat acreage may also lead to a decline in output and exports. A tight supply from Australia is significant as global wheat prices have risen sharply. Australia is a key wheat supplier to importers like China and Indonesia.

Wheat planting intentions are likely to decline in the MY 2022-23, despite strong export prices and favourable weather conditions, due to a rise in fertilizer, diesel, and chemical prices.

"The main reason being the higher input costs, that is fertilizer, diesel and chemicals. The conditions are present are very good for the majority of the country," said Andrew Whitelaw, Commodity Market Insights Manager at Thomas Elder Markets.

Thomas Elder Markets anticipate wheat acreage to range around 12.6 million-12.9 million hectares. In MY 2021-22, Australia's wheat acreage was around 13.03 million hectares.

The Australian Crop Forecasters has forecast MY 2022-23 wheat acreage at 12.7 million hectares, down 4% on year from 13.3 million mt.

"This area is not set yet though, majority of cereals have not been planted yet and there will be variance in the area planted upon local conditions," said James Maxwell, Senior Insights Manager at Australian Crop Forecasters.

Apart from the rise in input costs, Maxwell added the likely fall in the area is also due to crop rotation and high cattle prices.

"Despite reduced acreage, area planted will still be above average. At the end of the day, it will come down to seasonal conditions," Maxwell added.

However, some are positive that favorable weather conditions may push wheat acreage to record levels.

IKON Commodities estimated national wheat area to expand by approximately 5% to an all-time record 14.5 million hectares in MY 2022-23.

Despite the increase in input costs, strong global prices and adequate soil moisture due to better rainfall may encourage a higher wheat area in MY 2022-23, Josh Lawrence, advisory consultant at IKON Commodities said.

An anticipated fall in the acreage may also result in a lower output, with MY 2022-23 wheat output seen at 26 million mt, according to Australian Crop Forecasters.

IKON Commodities has projected Australia's wheat output in MY 2022-23 at a record level of 39 million mt.

Exports also seen impacted

Due to a likely fall in acreage and an anticipated drop in output, Australia's wheat exports may also see a decline.

However, the impact on exports may remain marginal as Australia is a net exporter of wheat.

"I do not see a large impact on exports going into 2023, they are likely to remain strong due to still higher than average production and large ending stocks," said Whitelaw.

Australian Crop Forecasters expect exports in MY 2022-23 at 20 million mt to 22 million mt.

"We're expecting record exports this season, so a second consecutive season would be unlikely. This season we're forecasting wheat exports of 27.5 million mt to 28 million mt of wheat exports, so there will be some carryover going into next season," Maxwell said.

A survey of market players in Australia revealed estimates for carryover this marketing year is between 4.5-7 mil mt, versus last marketing year's carry over of 4.7 mil mt.

"Over 50% will be feed or low pro ASW," one trading source said. Widespread rainfall in November 2021 during Australia's peak harvest period diluted protein levels and increased sprout damage.

Total wheat exports in bulk and containers for Oct 2021 -Apr 2022 is around 14.9 mil mt with China having shipped 2.7 mil mt, according to Andrew Woodhouse, Advance Trading said.

In Western Australia, some market players are expecting a carryover of between 1-1.5 mil mt of wheat but potentially dropping even lower as new crop only arrives in early December or possible early November, compared to harvests in October in the far north of Australia.