Outlook for Wheat

The gross value of Australian wheat production is forecast to fall by 39% to $9.5 billion in 2023–24. Despite being a significant fall from the estimated 2022–23 record of $15.7 billion, this is still well above average and would be the fourth highest value on record (Figure 1.1).

The forecast fall in value is driven by easing world prices and lower Australian production. World wheat prices are forecast to remain below the previous year’s highs because of easing supply uncertainty, but remain elevated. Australian wheat production is expected to decrease following three consecutive record production years:

• Dry conditions in northern cropping regions will likely see Australian wheat production fall in 2023–24, with yields forecast to be below average.
• This is likely to be partially offset by more favourable winter crop prospects in southern cropping regions where stored soil moisture and early winter rainfall were beneficial for winter crops.
• While El Niño is expected to develop and reduce production prospects, the extent to which it influences Australian rainfall and temperatures presents a key downside risk to the outlook. Analysis of past El Niño events suggests that climate impacts can be variable. If conditions are even drier and hotter than expected, this is likely to see crop prospects deteriorate further in regions where winter crops have little soil moisture.

The gross value of Australian wheat production forecast for 2023–24 is $200 million lower than in the June Agricultural Commodities Report. This largely reflects a slight downwards revision in wheat production volumes owing to lower-than-expected winter rainfall in some regions.

Figure 1.1 Annual gross value, volume and unit price of Australian wheat production

The value of Australian wheat exports is forecast to fall to $9.5 billion in 2023–24. Although a significant fall from the 2022–23 record value of $16.7 billion, this is still 36% above the 10-year average to 2022–23. Relatively high export values are expected because of high exportable supply supported by record 2022–23 production, and relatively high prices forecast for 2023–24. Major Asian markets continue to be the largest export destinations for Australian wheat, by value and volume. In 2022–23, Australia’s top five wheat export destinations – China, Indonesia, Vietnam, the Philippines and the Republic of Korea – accounted for 65% of total wheat export values (Figure 1.2).

Figure 1.2 Annual Australian wheat export values by destination

The Australian wheat export price (Australian Premium White) is forecast to decline by 6% in 2023–24, averaging $490 per tonne. This reflects falling world prices because of easing supply uncertainty outside of Ukraine across major wheat producing countries following the northern hemisphere harvest. Nonetheless, wheat prices are forecast to remain relatively elevated in 2023–24. The Russian Federation’s withdrawal from the Black Sea Grain Initiative and uncertainty surrounding Black Sea exports will likely add volatility to world grain markets in 2023–24 and keep international prices elevated (see Box 1.1).

Box 1.1 Black Sea remains a source of global uncertainty

The Russian Federation withdrew its participation in the Black Sea Grain Initiative (BSGI) on 17 July 2023. The BSGI – established following the Russian Federation’s invasion of Ukraine – had facilitated ongoing Ukrainian grain exports out of the Black Sea. After the grain export corridor came into effect, volatility in grain markets settled resulting in some moderation in prices, but world grain prices have remained relatively high.

The Russian Federation’s withdrawal from the BSGI has reduced Ukraine's ability to export grain and other agricultural products. Ukraine still has capacity to export via alternative non-seaborne routes including the Danube River ports and via rail and road. Nonetheless, Ukrainian grain exports are expected to fall considerably in 2023–24.

The Russian Federation's withdrawal caused world wheat prices to rally sharply to a 3-month peak as tensions in the Black Sea escalated and global uncertainty concerning Ukrainian exports heightened (Figure 1.3). Reports of strikes on Ukrainian ports and retaliatory strikes on Russian Federation vessels and a major grain hub raised concerns about a large-scale disruption to exports from the Black Sea.

However, global wheat futures prices have since retreated (Figure 1.3). This is supported by reports of continued shipments and competitive offers from the Russian Federation. Reports of expanding alternative export routes for Ukraine also helped limit increases in wheat prices. However, uncertainty surrounding Ukrainian grain exports may continue to be a source of volatility in the short term.

Figure 1.3 Daily international wheat futures prices

Australian wheat production is forecast to fall by 36% to 25.4 million tonnes in 2023–24. This is below the 10-year average to 2022–23 of 26.4 million tonnes. While production is forecast to fall overall, varying seasonal conditions across Australia point to different state-level outlooks (see Australian crop report):

• Planting and establishment conditions were unfavourably dry in Queensland, northern New South Wales and northern cropping regions of Western Australia. This has led to crops experiencing moisture stress, with wheat yields forecast to be below average.
• By contrast, wheat crops in southern New South Wales, Victoria, South Australia and southern cropping regions of Western Australia have developed well following early winter rainfall and have excellent yield potential heading into spring.
• The increased chance of an extremely dry spring is expected to negatively affect yield potential. Crop prospects in regions where winter crops have little soil moisture will likely deteriorate further.

Lower production is expected to reduce Australian wheat exports; wheat export volumes are forecast to fall to 20.4 million tonnes in 2023–24. This is 10% above the 10-year average to 2022–23 of 18.6 million tonnes.

World wheat production is forecast to remain above average in 2023–24 at 791 million tonnes, falling slightly from the record 2022–23 world wheat crop. The fall is driven by lower production in major exporting countries including Australia, Kazakhstan and the Russian Federation. These reductions in production are expected to more than offset higher production in Argentina and the United States. Wheat production in Canada, the European Union and Ukraine are estimated to be similar to 2022–23 production volumes. Changes in production in the Russian Federation, Argentina and the United States are expected to impact world wheat production in 2023–24:

• Russian Federation wheat production is forecast to fall from a record high but remain well above average in 2023–24, however, wet conditions have delayed harvesting in some regions. High Russian Federation export volumes are expected to continue in 2023–24, supported by high production and discounted prices.
• A shift from dry to wet conditions (due to the influence of El Niño) in Argentina is expected to cause a rebound in wheat production in 2023–24. Sowing has progressed under mixed conditions as soil moisture starts to recover.
• In the United States, total wheat production is set to increase to 47.2 million tonnes in 2023–24, yet this is 10% below the 10-year average to 2022–23. Persistent dryness has limited the yield potential of wheat in the United States, leading to below-average production. An increase in US winter wheat production is forecast for 2023–24, partially offset by a fall in spring wheat production. US wheat exports are forecast to remain below average in line with below-average production.

World wheat demand is forecast to rise slightly in 2023–24, reflecting an increase in food consumption and feed use.

• Demand for milling wheat is expected to rise in line with population growth, remaining strong given it has few substitutes and is used to produce staple food products such as bread, pasta and noodles. However, pressure on disposable incomes from rising prices is expected to weigh on demand from some importing countries (see Economic Overview).
• World feed demand is expected to rise slightly in 2023–24, supported by higher use of feed wheat in China, where record rainfall during the wheat harvest adversely affected grain quality. However, in the European Union and key feed importing countries in South-East Asia, feed wheat demand is expected to be constrained in 2023–24 reflecting increased use of competitively priced corn.

Increased chance of a dry spring

The latest 3-month rainfall outlook (September to November), issued by the Bureau of Meteorology on 24 August 2023, suggests that spring is likely to be drier than average across major cropping regions in Australia. The increased chance of an extremely dry spring presents a significant downside risk to the 2023–24 winter cropping season. Spring rainfall could be insufficient to restore depleted soil moisture required for plant growth, resulting in lower yield potential.

Tight fertiliser supplies following surge in demand may reduce yield potential

Better-than-expected seasonal conditions have led to a sudden surge in demand for nitrogen fertiliser in south-eastern Australia, tightening domestic nitrogen fertiliser supplies. Urea – a type of nitrogen fertiliser – is often applied by farmers to improve crop yield potential. Renewed fertiliser supplies are anticipated soon, with a shipment expected to arrive at Geelong in mid-September. Growers typically apply urea by the end of winter to maximise yields. This raises concerns that late application – following the mid-September shipment – may reduce the effectiveness of nitrogen application and that yield potential cannot be realised, leading to lower overall wheat production.