SYDNEY, AUSTRALIA — Australia’s wheat export volumes are expected to increase 2% to 16.9 million tonnes in 2015-16, according to the December quarterly report from the Australian Bureau of Agricultural and Resource Economics and Science (ABARES).

This forecast reflects slightly higher opening stocks, the forecast increase in production and demand growth in some key export markets. The value of the exports is forecast to rise by 3% to A$5.7 billion, supported by an assumed depreciation of the Australian dollar. If overall crop quality is worse than expected, export volumes and values are likely to be lower than currently forecast.

Prospects for 2015-16 wheat production weakened during spring, reflecting generally unfavorable seasonal conditions. Rainfall was below average in many cropping regions during September and early October and daytime temperatures were significantly above average in southern Australia during early October, ABARES said.

Despite this, a small increase in Australian wheat production is expected compared with the previous season. However, outcomes between states and regions are expected to vary significantly. Wheat production is forecast to rise by 1% in 2015-16 to 24 million tonnes. Higher production is forecast in New South Wales and Queensland but lower production is forecast in Victoria, South Australia and Western Australia, compared with 2014-15.

The largest percentage decline is expected to be in Victoria, where seasonal conditions had also been unfavorable during winter and prospects were already relatively poor at the beginning of spring. Harvesting is largely complete in Queensland and is well under way in most other states. Crop quality has varied widely between states and regions for crops harvested to date. Crops in many regions have had high screenings and low protein levels. In contrast to much of the rest of Australia, wheat quality in Victoria has been generally good to date.

Growth in demand for milling wheat is expected to support Australian wheat exports to key markets in Southeast Asia, including Indonesia. However, exporters of Australian wheat will face increased competition in 2015-16 from an expected rise in U.S. wheat exports to the region, despite an overall decline in U.S. wheat exports. China is expected to continue importing modest amounts of high-quality milling wheat, mostly from Australia, Canada and the U.S., despite record domestic production and rising stocks.

Australian wheat exports to China will also face strong competition from U.S. wheat exports in 2015-16, as is the case in Southeast Asia. Volume of Australian wheat exports to the Middle East and North Africa is expected to remain low in 2015-16. This results from reduced import demand in these regions and strong competition from exporters in the Black Sea region and the E.U., where supplies of wheat for export are expected to be plentiful.

Exports to the Middle East and North Africa accounted for 17% of Australian wheat exports in 2014-15 and just 13% in the first quarter of 2015-16. This compares with an average of 26% over the 10 years to 2013-14.

Australian wheat exports to India accounted for a significant share of Australian wheat exports in the final quarter of 2014–15 and the first quarter of 2015-16 but are not expected to do so during the remainder of 2015-16. This is because of an increase in the wheat import duty. India imported high-quality milling wheat (mostly from Australia) to blend with domestic supplies following quality issues with its domestic harvest in March and April. However, the Indian government introduced a 10% wheat import duty in August, which slowed imports. It increased the duty to 25% in October, making further imports uneconomic at prevailing domestic prices.

Australian coarse grains production is forecast to increase by 3% in 2015-16 to 12.2 million tonnes, largely reflecting an increase in planted area. Barley production in Australia is forecast to rise by 2% in 2015-16 to around 8.2 million tonnes. This reflects a 4% increase in planted area.

Grain sorghum production is forecast to increase by 5% to 2.2 million tonnes. Heavy November rainfall improved soil moisture levels in major grain sorghum growing regions and set up favorable planting conditions. However, expected returns from growing cotton are high relative to those from grain sorghum so competition for available land is expected.

Total coarse grain exports are forecast to fall by 8% in 2015-16 to 7.2 million tonnes, with exports of barley and grain sorghum expected to fall. This forecast reflects an expected fall in import demand from China.

Exports of grain sorghum are forecast to fall by 17% in 2015-16 to 968,000 tonnes. Imports of Australian grain sorghum into China in the first quarter of 2015-16 were equivalent to almost 60% of total imports in 2014–15. However, this import rate is not expected to continue after the Chinese government lowered the reserve price for domestically grown corn in September and introduced permits for importation of grain sorghum from November.
Australian canola production is forecast to fall by 14% in 2015-16 to around 3 million tonnes, largely because of a fall in planted area. Despite a warmer and drier than average finish to the season in most canola growing regions, average yield for Australia is expected to be largely unchanged from 2014-15 and only slightly below the five-year average to 2014–15.

However, canola yields and quality are expected to vary significantly by state.

Australian canola exports are forecast to fall by 14% in 2015-16 to 2.1 million tonnes, reflecting the expected decline in production. Forecast increases in export prices are expected to partially offset the impact of these forecast falls in canola shipments and, as a result, value of canola exports is forecast to be 8% lower at A$1.2 billion.
Australian canola exports to China are expected to decline by around 50% in 2015-16 to 250,000 tonnes because of a forecast fall in supply of canola available for export, an expected fall in import demand from China and relatively strong canola exports from Canada (China’s main supplier of canola). In the first quarter of 2015-16, Canada exported 1.1 million tonnes of canola to China and no exports were recorded from Australia.