It’s been a huge couple of years for Australian grain. We have produced bumper after bumper crops, and they have to go somewhere.
When we broke the drought and started getting these huge crops, the issue was getting the grain out of the country. Our price was depressed versus overseas; one reason was the inability to get the grain onto the overseas market.
The newest data is out there showing the volume exported up until May, and it’s been a whopper in terms of volumes exported.
The first chart below shows the cumulative wheat exports from December. The exports are running at a huge pace. The export pace has been consistently high since the start of the year.
Our exporters have gone in a short period of time from suffering through drought, where export volumes were limited as grain went to the domestic market, to regularly hitting new records.
Grain volumes in Australia will grow as our yields improve and our area increases. The volume we are able to export now reduces the ability of the trade to use ‘export capacity’ as an excuse for large negative basis levels.
The reality is that basis is driven by supply, and large supplies reduce the need to chase grain and increase price.