APW/ASW spread narrows as Australia set for high-protein wheat crop

The harvest results from what is expected to be Australia’s second biggest wheat crop on record show that heavy rains through the...

The harvest results from what is expected to be Australia’s second-biggest wheat crop on record show that heavy rains through the final development stages have not damaged the protein of content of the crop, with higher protein grades prevailing in most states. 

Anticipation of strong higher protein supply has led to the price difference between premium and standard wheat grades narrowing as the pace of harvest has picked up, with the harvest nationally now around 45% completed.

The results show that, in all states except Western Australia (WA), Australian Premium Hard (APH) grade is dominant, while WA results show an even split between ASW and APW, with APW slightly ahead.

That has held back prices in the export market, with the gap between the Agricensus FOB ASW and APW assessments declining from $10/mt on October 21, to $3/mt now.

“Given the (higher) quality that is coming in… spreads are narrowing,” an Australia-based broker said, adding that there is can still be further changes as the harvest continues in the main exporting region of WA.

“The price differential between ASW and APW, it’s already converged,” a trader said.

The trend comes as the biggest increase in production is expected in the east of the country, where states like New South Wales and Queensland traditionally grow wheat with higher protein levels.

In addition, the region is also more focused on the domestic market rather than export, so there is stable demand for feed grades, potentially freeing up excess for the export market and providing bedrock demand for the lower protein grades.

“Typically the domestic market will consume a large chunk of the lower protein wheat,” a second trader said.

Meanwhile, in WA wheat production is expected to be recover following several years of drought conditions, while big volumes have already being booked for December-January loading.

The bulk of that buying comprises of lower grade wheat, as buyers who were burned in earlier seasons by tight availability of feed grades in the Black Sea look to move early to lock up supply now.  

Meanwhile, even with replacement costs falling in WA, it remains very difficult to find firm export offers for January-February, as the big exporting programme along with slow farmer selling keeps export prices supported.

What to read next
The boost to the outlook is due to higher than expected yields and larger planted areas, compared to the drought-affected 2022/23 year
Brazil's customs data revealed that soybean exports for the first two weeks of January 2024 has already surpassed the figure for all of January 2023
The latest Wasde report by the USDA tightened its view of US wheat balances but compensated for the trim with a significant upswing in global supply and stock figures
Export flows of French wheat faced stiff competition through 2023 as resurgent Russian wheat production and aggressive marketing forced traders to look beyond their usual markets
Canadian Grain Commission data suggested that the country's grain and oilseed exports fell at the end of 2023
There has been an increase in daily volumes compared to last year, although wheat exports are slightly down, according to sources