Australian Crop Update – Week 5, 2025

Increased farmer selling and reports that Chinese buyers were trying to washout Australian wheat purchases and sell them back into Southeast Asian markets were behind the weakness in the early part of last week, but wheat and barley cash bids were generally firmer into the weekend. 
 
Sorghum harvest has started in Southern Queensland (QLD) and Northern New South Wales (NSW) around Moree. Northern NSW is forecast to see some storms late next week which could slow progress. Early yields in Southern QLD and Northern NSW have been favourable.

There was 656 thousand metric tonne (KMT) of wheat put onto the stem in the past week which is the most in 18 weeks. Half of the wheat additions were in Western Australia (WA) but there was also 142KMT in NSW and 100KMT in South Australia.
 
There was also 172KMT of barley put onto the stem in the past week, split between SA and WA.
 
There was a further 73KMT of canola put on the stem as well.
 
Overall, wheat shipments are historically lagging while the barley and canola export pace is strong.
 
The Lunar New Year holiday is now in full swing with many Asian countries on leave this week. As the rates steadily declined over the past few weeks, it has caused market sentiment to be the lowest since the start of COVID – with freight rates to match. All sectors have been affected with many owners having to fix low freight or TC rates on the spot basis in order to find coverage with the hope that the market will improve once the Long Holidays are over. While this week we are not expecting any wholesale changes in the market, there is a general sense that rates are dragging along the floor and looking forward, there is still optimism that the market will bounce once the spot/prompt tonnage is cleared (which will take a couple of weeks). Helping this sentiment, there still appears to be a healthy amount of cargo enquiry currently in market, albeit at reduced levels. On a macro level, news of a ceasefire in Gaza was welcomed. If the truce is held, we will wait to see when the Red Sea is safe to transit again without the threat of a Houthi attack which would dramatically reduce the tonne/miles on many trades.

The Australian dollar was up 2% to finish last week when valued against the Greenback closing at 0.6300. The market traded with nervous optimism through the first week of Trump's second presidency as a more benign than expected policy agenda emerged. Heading into this week, the focus was on inflation rates. Q4 2024 CPI printed below consensus forecasts (as it has tended to do over the past two years), and importantly it also undershot the RBA’s projections. Headline inflation rose just 0.2% in Q4 with the annual rate running at 2.4%pa. As such, most banks now feel the RBA will announce a 25bp interest rate cut when it meets on 18 February. A 25bp move is now ~96% factored in. While the first step has been brought forward the outlook for the RBA’s cycle hasn’t materially changed. Interest rate markets are pricing in just over three cuts in 2025.
 
Most analysts believe further near-term downside should be limited. At the same time however, with US trade tariff risks still lurking and the USD firm, any near-term AUD rebounds are also likely to be capped. As per our 2025 outlook we see the AUD oscillating in the low- to mid-$0.60s over coming months as domestic and offshore cross-currents play out.