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West-to-east grain trade from 2018-19 harvest shores up domestic market

GrainCorp Port of Brisbane site manager Kellie Weise on the berth at Fishermans Island, where the latest vessel bringing wheat into Queensland from Western Australia unloads.
Photo: Liz Wells

East coast drought prompts record interstate grain shipments to keep mills running.

Western Australia traditionally exports more than 90 per cent of all grain produced, but the eastern states drought has meant big tonnages from its unusually large 2018 Australian Standard White (ASW) wheat and feed barley crops have found a strong domestic market this year.

Carried by a steady procession of ships heading east through Bass Strait, the western - and southern region - grain has helped Australias major grain users to sustain production by supplementing their local wheat, barley, oats and canola supplies through most eastern Australian ports.

An estimated three million tonnes of grain is likely to be shipped into New South Wales and Queensland. Of this, 60 to 65 per cent is expected to originate from WA, 25 to 30 per cent from SA and the balance from Victoria.

Price strength

CBH Groups general manager marketing and trading, Jason Craig, says high-yielding crops and a soft finish late in the 2018 season saw protein in wheat diluted, making large volumes of ASW and Australian Premium White (APW) available, as well as good volumes of feed barley.

These have traded at excellent values. During harvest, feed barley prices traded at record levels of $300 to $340/t free in store, and while not at a record, ASW was priced strongly at $330 to $360/t. This east coast demand held barley prices up around $20 to $30/t above international values.

In previous years, this grain would have been exported to markets such as the Middle East and Asia, and Mr Craig says their demand will more than likely be filled by exporters from the Black Sea, North America and Europe this year.

Shipping this three million tonnes to the east coast, rather than shipping to traditional markets, will simply mean wheat flour millers will adjust their grist, or flour recipes, to reduce their reliance on Australian wheat, and feed barley end users will look for alternative grains such as corn, or alternative origins," Mr Craig says.

"We dont see this as an issue for Australia supplying these markets in future years

Big yields, low protein

High rainfall in most WA growing areas, coupled with a soft spring finish, saw its growers harvest around 17 million tonnes of grain last year, more than double the figure from the drought-affected eastern states.

Australian Export Grains Innovation Centre (AEGIC) chief economist Professor Ross Kingwell says WAs wheat protein, particularly in lower-rainfall regions, was generally low in 2018 because growers chased higher-yielding crops of ASW due to the lack of attractive premiums for higher-protein grades.

A large proportion of this lower-grade wheat will be exported from WA to eastern states ports, Professor Kingwell says.

In regions where rain at harvest has downgraded barley to feed grades, some of this volume of grain will also flow east.

"Many WA growers have been blessed by high grain prices and favourable yields."

Receival task

Leading eastern states bulk handler GrainCorp operates five of the nine terminals that are receiving interstate grain.

Nigel Lotz, GrainCorps general manager operations grains, says the U-turn in the companys grain supply chain has brought improved efficiencies as the task expands in tonnage and locations.

We are familiar with that imported supply chain through our handling of fertiliser, and this grain task has been an extension of that, he says.

When the market responded and started to price grain coming in from other states by ship, we responded too.

Mr Lotz says port terminals have allowed buyers to access grain as quickly as possible, sometimes on the day of its arrival, from silos near the port, which receive shipped tonnage transferred by road from the berth, where they load under hoppers filled using ships grabs.

Poultry and stockfeed millers in and near Brisbane, feedlots on the Darling Downs, and the Barrett Burston Malting plant at Pinkenba, Queensland, were the first to book domestic wheat and barley arriving by ship as stocks in NSW and Queensland dwindled in late 2017.

Newcastle, then Port Kembla, NSW, and now Gladstone, Queensland, have since joined the receiving list for interstate grain for the first time since 2007-08, when volume was less, largely because fewer cattle were in feedlots, and demand for paddock feed from graziers was lower.

Eastern Australias domestic feedgrain demand sits at 10 to 10.5 million tonnes, and its projected use of interstate grain tripled to the current level in August, when it became evident that large areas of NSW and southern Queensland had little chance of producing a winter crop.

Ongoing demand for fodder brought about by strong sheep and cattle prices, as well as late frosts, which reduced the yield outlook for a lot of crops from Victoria to Central Queensland, pushed up that interstate grain demand in August to September.

For the northern ports, its been feedlots that have driven demand, whereas grain coming into Newcastle and Port Kembla has been more for human consumption or industrial use, including canola for crushing.

Boolah Commodity Management (BCM) is the logistics arm of Stuart and Lyndall Tighes Boolah Partnership, and is also playing a part in getting shipped grain out of the Port of Brisbane.

Since February last year, BCM has received roughly one vessel per month at the public berth in Pinkenba, and stored grain at nearby sites prior to its delivery to end users in and around Brisbane and the Darling Downs.

Mr Tighe says the market kicked into gear once grain delivered to Brisbane hit a premium of about $100/t over grain ex storage southern NSW. Thats what made the figures stack up to bring it around by sea.

While imported meals such as soybean and copra are standard inclusions for stockfeed millers, imported grain carries biosecurity risks and the need for heat treatment.

This may erode any free-on-board price appeal it might hold at American or European ports. Therefore, no imported grain is expected to be used in the current marketing year.

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