Due to favourable growing and harvesting conditions Australia’s wheat production for the crop year Jul ‘20–Jun ‘21 is estimated to be a record 33 MMT, more than double the 15.2 MMT in the previous crop year.
Yields have been especially high such that marketing year exports (Oct to Sep) are forecast to more than double y-o-y to 21 MMT.
Exports started to gain pace from the start of the year with 5.1 MMT wheat exported in Jan/Feb an annual record for this two-month period. Shipments to South East Asia have been especially strong.
Apart from plentiful supply, a competitively priced Aussie dollar versus USD as well as much higher freight rates from alternate suppliers in Q1 like Argentina and Russia/Ukraine in the Black Sea has played its part.
China was Australia’s No.1 market in 2020 with exports totaling 2 MMT though to date shipments have been modest with just 4 vessels reported with wheat to China; now however rumours abound that they have made substantial purchases in Q2.
Perhaps a contributory factor for China turning to Australia has been Russia’s decision to impose a wheat export tax of 25 euros per tonne starting 15 Feb in an effort to stabilise domestic food inflation. This export tax rose to 50 euros per tonne on 1 Mar and is intended to stay in place at least until 30 Jun.
This increased level of wheat exports from Australia has given the Pacific sub Cape market a significant boost during Q1, and with shipments set to increase further in Q2, it has no doubt been a contributory factor for Pacific round voyage rates in both Panamax and Supramax now exceeding trans-Atlantic timecharter rates.