Global grains market oversupplied: Rutter

Claire TyrrellCountryman
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Gavilon Australia general manager of origination Matt Rutter spoke about the global grains market at the Australian Association of Agricultural Consultants outlook day.

He said a neutral to bearish grain market outlook was predicted for the harvest period and summarised the state of wheat, barley and canola market coming out of Australia over the next few months.

"There is a loose grain balance sheet for most grains out of Australia," he said.

"Australians are about to sell significant volumes of grain into an already oversupplied market."

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Mr Rutter said already low wheat prices could drop even further due to the overpriced US and world market.

"US export wheat is still overpriced in the international market and it could be argued that it needs to come down more; this would only pressure our prices down further," he said.

He said there was likely to be a surplus of low-grade wheat coming out of Australia, because of protein deficiencies in the eastern states and a wet WA grain harvest.

He noted the strong correlation between US corn and wheat prices.

"If corn gets too expensive relative to wheat, feed millers will substitute corn with wheat," he said.

"If corn does rally, there is a good chance wheat will get dragged along."

Mr Rutter said US corn could start to work into China, which could subsequently put a floor in the wheat market. He said the wheat futures market showed a solid downtrend and investors were starting to question how low it could go.

Gavilon predicted a similarly bearish outlook for barley prices.

Mr Rutter said the outlook for feed barley prices was not strong.

"Feed barley compared to milling wheat remains at a premium, which is unsustainable," he said.

"We are seeing feed barley at the moment pricing roughly at the same price into Saudi as to what ASW is pricing into China and pressure will come on the feed barley market."

He said the three main markets for Australia's barley were Saudi Arabia, China and Japan.

"The good news is that Australian barley is the most competitive in the world and it will continue to compete into these markets," he said.

"We do feel that we won't lose market share, but to remain competitive it depends on what our competition does."

A neutral to bearish outlook for canola was supported by good supplies in the Australian market.

Mr Rutter said European demand for Australia's canola could result in a lift in prices. He said the European canola market was tight for the second year in a row.

"Europe is a non-GM importer, so can really only import from Australia," he said.

"They need all of Australia's exports this year and they are going to have to pay to get it."

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