Market Check - Grain Export Watermarks Reset (Oct 2021)

Grain Export Watermarks Reset (Oct 2021)

The export task in 2021 has been nothing short of historic. This is especially the case when you consider that 2021 was following a long and brutal drought. This is relevant as most of the East Coast export infrastructure had either been collecting dust the past few years or reconfigured to accommodate imports given the feed deficit in NSW/QLD. Not only that, but investment in our supply chain was also negligible, as a multi-year drought tighten belts industry wide, while trucking investment was low given the poor margins for the past few years.

So, if we look at the chart below, we can see just how big our export program has been this year (looking at wheat, barley and canola). The much bigger volumes obviously go hand in hand with a much bigger crop, as our exportable surplus of grains and oilseeds exploded in the 2020/21 season (Oct-Sept), as the country harvested record crops. The export volumes this season are even more impressive given Oct/Nov were almost write-offs given the non-existent carry-in left from the previous season.

These sorts of volumes though were only achieved with a special ingredient, one that is unfortunately rare in the Australian grain market, positive export margins. For most tonnes that found their way through our supply chains and onto a boat, a handsome margin was earned by the bulk handler/trader. These positive margins, which in some cases were as good as they’ve ever been, incentivised both existing infrastructures to be pushed to the brink, but also new investment into port loading capacity to capitalise on the opportunity at hand. This new investment took many shapes, for example mobile ship loaders, which were primarily utilised in Victoria and SA which allowed for greater monthly volumes than otherwise would have been achievable. It wasn’t all fun and games though, with margins on paper looking much healthier than they were in reality given the numerous execution risks this year such as demurrage, freight rates, COVID, container availability etc.

After it’s all said and done, the 2020/21 season will likely go down as the biggest export year in terms of volumes for our three major winter crops in history. It has been a season that we desperately needed to breathe life into the industry at all levels. At time of writing, spring has been hit and miss, with frosts and some regions seeing little moisture through September, while NSW continued to improve. Hopefully early October can get us back on track to achieve top line yield estimates, however we are getting a sense of what the next 12 months might bring when it comes to export volumes and supply chain utilisation. It’s clear we have another year of pushing our export infrastructures to the limit, especially in WA if the weather plays ball. Luckily, this coming season the supply chain is a well-oiled machine which will be much more accustomed to handling big volumes. That’s not to say there won’t be breakdowns here and there or that the raging freight market won’t cause some upsets, but the industry has proven, where there’s a margin, there’s a way.

Editor: Nick Crundall, Head of Strategy, Market Check

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