Australia wheat prices sink to 2-year low amid Black Sea supply glut, weak demand

Australia Premium White wheat prices plunged to a two-year low of $260/mt FOB Kwinana due to strong competition from Europe and slow demand.

Since the start of the year, APW has lost $40/mt or 13%. Prices have not been this low since December 2021, based on S&P Global Commodity Insights data.

The CFR Indonesia price for APW wheat has also declined about 13% from the high of $315.75/mt Dec. 29 to close at $276/mt, based on S&P Global data.

Australian wheat prices are under pressure and are reflecting the sluggish global trend despite Australia having a smaller crop this marketing year. In the latest quarterly report by the Australian Bureau of Agricultural and Resource Economics and Sciences, or ABARES, released this week, its estimates for national wheat production was at about 25.95 million mt, a 34% drop from the 2022-2023 marketing year (October to September).

With strong competition from the EU and Black Sea, Australian wheat is outpriced by $30-$40/mt on a CFR basis which leaves only inelastic demand, industry sources said. 11.5% protein Black Sea wheat, which was offered at around $250s/mt CIF Indonesia last week, has fallen to $235-$245/mt CIF this week, according to market sources.

"Only the Philippines really is looking at buying Australian feed wheat," said a grains trader based in Australia. Another source based in the Philippines added, "Many buyers are still worried about the risks of shipping delays from buying cargoes from the Black Sea."

"Exporters' bids to farmers for Australian wheat have fallen a lot over the past two days," said a trade source based in Singapore March 8. "The market is really weakening, and buyers with demand for Australian wheat are all hesitant to cover their positions for now as they worry that prices will drop further."

Early in the year, feed wheat demand in Asia had not been healthy due to the price advantage of feed corn but as more Black Sea supplies emerged, feed wheat became more competitive, and more demand returned in the week beginning March 4. Feed buyers from South Korea and Thailand paid around $245-$246/mt CFR for Black Sea origin cargoes in tenders this week.

While uncertainties remain over the wheat markets in the year ahead, overall sentiment remains largely bearish.

Listen to this related podcast: Lower prices and uncertain demand: navigating choppy waves of wheat markets in 2024.