Why it matters: Australia is a major export competitor with Canadian grain into Asian markets

In a quarterly crop report for December, the government’s ABARES agency also lifted its projections for Australia’s barley harvest by around 1.1 million tonnes to 15.7 million tonnes and canola production by around 800,000 tonnes to 7.2 million tonnes.

Australia is one of the world’s biggest exporters of all three crops and is roughly halfway through its 2025/26 harvest. Wheat is used mainly for milling into flour, barley for animal feed and canola, or rapeseed, to crush for oil.

Plentiful supply helped push benchmark Chicago wheat futures in October to their lowest level since 2020. Barley and canola prices are holding up better, with barley in particular having more supportive supply-demand fundamentals.

“National winter crop production has been revised higher,” said ABARES, which stands for the Australian Bureau of Agricultural and Resource Economics and Sciences.

It said this was due to timely spring rainfall at critical growth stages and mild spring temperatures in most cropping regions.

Wheat production is now set to be four per cent above last year’s 34.1 million tonnes, 29 per cent above the 10-year average and the third-largest for any season on record, according to ABARES.

Barley output should come in 18 per cent above 2024/25’s 13.3 million tonnes, 33 per cent above the 10-year average and be the biggest ever.

The canola harvest is on track to be the second-largest on record, beating last year’s 6.4 million tonnes by 13 per cent and the 10-year average by a whopping 50 per cent, ABARES said.

The median estimates of five analysts just before ABARES published its numbers were for Australia to produce 36.1 million tonnes of wheat, 15.75 million tonnes of barley and 6.9 million tonnes of canola this season.

ABARES also issued forecasts for Australia’s summer crops, saying the country should produce 2.6 million tonnes of sorghum in the upcoming harvest, down four per cent from 2024/25, 943,000 tonnes of cotton lint, 23 per cent less than last season, and 178,000 tonnes of rice, down 66 per cent.

The sharp falls for cotton and rice are due to the lower availability of irrigation water, it said.

— Reporting by Peter Hobson

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Why it matters: La Nina or El Nino weather patterns influence the jet stream, which affects temperatures and precipitation in North America.

La Nina, and its analogue, El Nino, are caused by the cooling or warming of ocean surface temperatures in the eastern and central Pacific.

The former typically brings greater rainfall to eastern Australia, Southeast Asia and India with drier weather in the Americas, while El Nino does the reverse. Both can also lead to hurricanes and flooding.

Models forecasting the weather patterns typically converge on a strong signal around this time of year but there is currently a lot of variation, said Felicity Gamble of Australia’s Bureau of Meteorology.

“That speaks to the fact that there’s still a lot of uncertainty in the system,” she added.

La Nina conditions were present in weak strength, and would probably persist through December, the U.S. National Oceanic and Atmospheric Administration (NOAA) said this month.

The Australian bureau’s model shows sea surface temperatures brushing a La Nina threshold of 0.8 degrees Celsius below neutral levels in October, November and December before moving back towards neutral.

But the effect of the cooler water on atmospheric indicators such as cloud patterns and trade winds is not strong enough to impart confidence that a La Nina is taking place, Gamble added.

“Our model is probably one of the weaker forecasts for La Nina,” the senior climatologist said.

Although NOAA considered the atmospheric response sufficient, she said, “We’d like to see more.”

Except for some islands in the southwest Pacific, there was also no strong signal of rainfall patterns typically associated with La Nina, Gamble added.

“Because we aren’t seeing a particularly dominant La Nina-like pattern, we aren’t seeing the same magnitude of impacts … When you have a weaker signal, you can have other influences start to play a bigger role and perhaps override it,” she said.

Three consecutive La Nina events between 2020 and 2023 brought plentiful rainfall leading to record crop yields in Australia, but drought and heatwaves in parts of the Americas.

— Reporting by Peter Hobson

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Corn followed soybeans higher as an expected yield forecast cut underpinned the market, although gains were limited by projections for a record-large U.S. crop.

Wheat futures firmed on short covering after a stronger dollar and rising global supplies had dragged prices to near five-year lows.

Corn and soybeans gained despite the ongoing U.S. harvest, but both markets have struggled to break out of recent ranges as a U.S. government shutdown has disrupted agricultural data and deprived the market of its usual direction.

Analysts polled by Reuters expect the latest yield estimates from the U.S. Department of Agriculture to be reduced when the agency resumes reporting data. Its monthly supply and demand report, originally scheduled for release on Thursday, will not be issued.

“I don’t feel like we’re getting a whole lot of harvest pressure in beans. Farmers are not aggressively selling beans even though they are aggressively harvesting beans,” said Ted Seifried, chief market strategist for Zaner Ag Hedge.

Cash basis values around the Midwest have been firm this week due to slower-than-normal sales.

Optimism that a meeting between U.S. President Donald Trump and China’s Xi Jinping at the end of the month could revive Chinese buying of U.S. soybeans offered additional support, Seifried said.

The market is awaiting details of a farm aid package that could help growers struggling with China’s lack of purchases.

Soybeans were also underpinned by labor tensions in Argentina, where workers at soy processors called for a strike this week.

Chicago Board of Trade November soybeans rose 7-1/2 cents to $10.29-1/2 a bushel, while December corn added 2-1/4 cents to $4.22 a bushel. CBOT December wheat was 1/2 cent higher at $5.07-1/4 a bushel.

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Corn and wheat futures followed soybeans lower. Additional pressure stemmed from the ongoing Midwest harvest, even as market players debate the size of this year’s corn and soy production.

Chicago Board of Trade November soybeans were down 12 cents at $10.25-1/2 per bushel, near the contract’s 50-day moving average and its lowest level since Sept. 11.

CBOT December corn was down up a quarter cent at the close at 4.24 a bushel and December wheat was down 1-3/4 cents at $5.22-1/2 a bushel.

Soybeans rose early on hopes that the Trump-Xi call could help end a freeze in soybean shipments between the two countries. China, by far the world’s largest soy importer, has yet to book any of the current U.S. soybean crop and has instead turned to South American supplies.

The two leaders made progress during the call on a TikTok agreement and pledged to meet face to face in just over a month in South Korea, but there was little mention of agriculture. CBOT soybean futures turned lower after the call ended.

“The market had been hoping for a lot more positive outcome from these talks,” said Ted Seifried, chief strategist for Zaner Ag Hedge. “It doesn’t sound like (U.S.) soybean sales are going to be happening any time soon, and that is putting a fair amount of pressure on markets.”

The harvest is expanding in the U.S. corn belt. Unusually warm temperatures this week are pushing crops toward maturity, the U.S. Department of Agriculture said in a daily weather note, with highs near 90 degrees Fahrenheit (32 Celsius) as far north as the Ohio River Valley.

Traders are monitoring early yield reports to gauge the impact of crop diseases and late-summer dryness that could prompt the USDA to lower its yield estimates next month.

Meanwhile, a rebound in the dollar since a U.S. Federal Reserve interest rate cut on Wednesday also weighed on dollar-priced commodities.

Wheat futures were anchored by improving wheat harvest prospects in Australia and globally.

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China, the world’s largest canola importer, sources nearly all of its imports from Canada but those supplies could be limited by an anti-dumping probe Beijing is conducting. China imposed 100 per cent tariffs on Canadian canola meal and oil this year amid strained diplomatic ties.

Australia, the second-largest canola exporter, has been shut out of the Chinese market since 2020, mainly due to Chinese rules to stop the spread of fungal plant disease, but the trial cargoes could reopen trade and reduce Canada’s market share.

Chinese and Australian officials are finalising a framework to address Beijing’s phytosanitary requirements aimed at preventing the spread of blackleg disease, according to two Australian agriculture industry sources briefed on the negotiations.

“It looks like we’ve found a pathway that works for everyone,” said one of the sources. “Now we need to run a few ships and see if it all works.”

The five trial cargoes will be handled by trading companies once the framework is agreed, the sources said.

Two trading company sources familiar with the negotiations said the shipments would carry between 150,000 and 250,000 tonnes of Australian canola, also known as rapeseed, to China.

The sources declined to be named as they were not authorised to speak publicly on the matter.

In response to a query from Reuters, Australia’s agriculture ministry said: “This is an active and ongoing government-government discussion and details have not yet been finalised.”

China’s Ministry of Commerce and General Administration of Customs did not immediately respond to a request for comment.

China has bought an average of four million metric tons of canola, worth over $2 billion, each year for the last five years, for use in cooking oil, renewable fuels and animal feed.

Australian Prime Minister Anthony Albanese is currently visiting China, underscoring a warming of ties since his Labor government won power in 2022.

The planned shipments follow smaller test deliveries last year, when Australia exported 500 tonnes of canola to China in both June and July 2024, according to Australian trade data.

The negotiations have focused on addressing China’s requirement that canola shipments contain less than one per cent admixture — impurities such as chaff and broken seeds — and its concerns of blackleg contamination, the two sources briefed on the talks said.

Unlike Canadian exporters, who clean their canola before shipping, Australian suppliers often exceed this limit.

Additional demand from China should lift Australian canola prices, traders said, but Australia may not be able to fully replace Canadian canola in China.

The Australian government expects the upcoming harvest later this year to produce 5.7 million tonnes of canola, the least in five years, due to unfavourable weather and a smaller planted area.

Of that, Australia will likely export around four million tons of canola, much of which may be earmarked for longstanding customers in Europe and elsewhere, said one of the trade sources.

“China might struggle to get more than their trial volume depending on how quick they move,” the person said.

China had 159,000 tonnes of imported canola in its stockpiles as of July 4, the lowest level for this time of year in nearly four years, said Zhang Deqiang, an analyst at Shandong-based Sublime China Information.

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Soybean futures fell to a three-month low in the most-active November contract before finishing nearly unchanged.

“You can only sell stuff off for so long without getting some sort of a bounce,” said Sherman Newlin, an analyst with Risk Management Commodities.

Most-active December corn futures closed up 5-3/4 cents at $4.18 a bushel at the Chicago Board of Trade, and November soybeans ended 1/4 cent lower at $10.07 a bushel. September CBOT wheat futures finished down 3-1/2 cents at $5.41-1/2 per bushel and touched the lowest price since July 1.

Favorable U.S. weather conditions have hung over the corn and soy markets and fueled expectations for bumper autumn harvests. Commodity Weather Group said rain this week will reduce dryness in the important Midwest region.

After trading ended, the U.S. Department of Agriculture said 70 per cent of the nation’s soybean crop was rated good or excellent, up 4 percentage points from a week ago. That topped analysts’ estimates for 67 per cent.

The USDA rated 74 per cent of the corn crop as good or excellent, unchanged from a week earlier and in line with estimates.

“For corn, in particular, there have been a lot of yield models out there that have been projecting some pretty hefty numbers,” Newlin said.

“I think the trade has already digested that and has priced that in for the time being.”

Traders were monitoring U.S. President Donald Trump’s tariff threats amid worries that importers may retaliate by limiting purchases of American farm goods.

China, the world’s biggest soybean buyer, imported record volumes of soy for the month of June, a Reuters calculation of customs data showed, driven by a surge in shipments from top supplier Brazil.

On Tuesday, the National Oilseed Processors Association is expected to report the U.S. soybean crush data in June dropped to a four-month low, analysts said. It would still be the largest June crush on record, following an expansion of U.S. soy processing capacity.

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Ukraine is a traditional corn grower and exporter and exports are expected at around 22 million tons in the 2024/25 season.

“In the current conditions, we cannot compete with American suppliers on the European market,” UAC said in a statement, adding that U.S.-origin corn was traded at $230 per tons versus $256-$260 per ton for Ukrainian corn.

“Ukrainian corn is sold in small batches of 2,000 or 5,000 tons mainly to Greece and Cyprus. For comparison, the U.S. exports only large volumes of 25,000 tons or more,” the union said.

UAC noted that Ukraine already had limited volumes of corn available for exports in remaining months of this season and it did not exceed 1.5 million tons.

Ukraine exported 20.6 million tons of corn as of June 2, official data showed.

The union said corn prices would gradually decline to around $215 later in June and from the second half of the month demand could fall and the market would focus on the new harvest.

Ukraine harvested 27 million tons of corn in 2024 but the crop may decrease to 26 million tons in 2025 mainly due to unfavourable weather.

Farm minister Vitaliy Koval told Reuters on Tuesday that Ukrainian grain harvest may decrease by 10 per cent to around 51 million tons, according to the most pessimistic estimates.

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Corn futures followed soybeans lower. But wheat futures rose on short-covering as a Ukrainian drone attack in Russia shifted attention back on the war between the two grain exporters, and as the U.S. dollar declined.

CBOT July soybean were down 8-1/4 cents at $10.33-1/2 per bushel after dipping to $10.32-1/2, the contract’s lowest since April 11. July corn was down 5-3/4 cents at $4.38-1/4 a bushel while CBOT July wheat was up five cents at $5.39 a bushel.

Pressure in soybeans stemmed from trade tensions with China, the world’s biggest soybean buyer, after President Donald Trump on Friday accused China of violating an agreement with the U.S. to mutually roll back tariffs. However, Trump and Chinese leader Xi Jinping will likely speak this week, the White House said on Monday.

Ample Brazilian soy supplies continue to hang over the market. Agribusiness consultancy AgRural raised its forecast for Brazil’s 2024/25 soybean crop by 1.3 million tons to 169 million tonnes, citing improved yields in several states.

Uncertainty over U.S. biofuel policy pressured CBOT soyoil futures, which also hit their lowest since mid-April.

“Soyoil and soybean prices continue the selloff started last week as chart signals turn negative, with little help from the China-U.S. trade talks that have broken down,” StoneX Chief Commodities Economist Arlan Suderman wrote in a client note.

Ahead of the U.S. Department of Agriculture’s weekly U.S. crop progress report due later on Monday, analysts surveyed by Reuters on average expected the government to rate 68 per cent of the U.S. soybean crop as good to excellent in its initial ratings for the 2025 soy harvest, roughly on par with previous years.

For corn, analysts on average rated 69 per cent of the crop as good to excellent, up one percentage point from last week.

Most analysts expected the USDA to raise its ratings for the U.S. spring wheat crop after last week’s ratings fell well below trade expectations. U.S. winter wheat ratings were seen as steady as the harvest of that crop gets under way.

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The most-active July soyoil futures on the Chicago Board of Trade fell to their daily limit, at 49.32 cents per pound.

That pushed soybeans, which are crushed to produce soyoil and soymeal, down to a low of $10.46-3/4 per bushel in the July contract.

Soybeans had reached their highest price since late July on Wednesday, buoyed by a de-escalation in the U.S.-China trade dispute and optimism about continued U.S. tax credits for biodiesel fuel.

Concerns over biofuel policy, however, have re-emerged since Wednesday, with rumours that a target for renewable diesel volumes under discussion for next year will come well below the 5.25 billion gallons proposed by an alliance of oil and biofuel producers.

“It was disappointing for people who were banking for a bigger number,” said Terry Linn, vice president of Linn & Associates.

July soybeans finished 26-1/2 cents lower to $10.51-1/4.

Optimism over a temporary truce in the U.S.-China trade war, meanwhile, has subsided as analysts await more details on the ongoing negotiations.

On Wednesday, agribusiness consultancy AgResource estimated U.S. soybean exports may drop 20 per cent and that prices will plunge if the U.S. and China fail to resolve their trade dispute.

CBOT July corn closed three cents higher to $4.48-1/2, though back-month contracts settled lower under pressure from ideal planting and growing conditions in the U.S. corn belt.

July CBOT wheat ended up eight cents to $5.32-3/4 a bushel as low prices triggered a swell of buying demand for cheap U.S. wheat.

Export sales of wheat in the week ended May 8 totalled 804,800 metric tons, according to the U.S. Department of Agriculture, on the higher end of analyst expectations.

A U.S. crop tour in Kansas this week has pointed to above average yields in the country’s biggest wheat-producing state.

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The U.S. Department of Agriculture decision is a victory for meat companies and industry associations such as the National Chicken Council, which have advocated for faster processing line speeds.

However, it adds to health concerns about slaughterhouse workers, who often perform repetitive tasks with sharp knives and toil in extreme heat or cold.

USDA will start a process to make permanent higher speeds that it allows at some facilities under waivers, according to a statement. Chicken plants with waivers can process up to 175 birds per minute, compared to a previous limit of 140 birds.

The agency also will extend waivers, allowing facilities to “meet demand without excessive government interference,” the statement said.

USDA’s announcement cited a lack of direct links between processing speeds and workplace injuries, but research shows that meatpacking workers face a greater risk of serious harm.

Worker unions and other advocacy groups have long argued that greater speeds threaten food safety and pose a higher risk of stress injuries and accidents for workers. Immigrants and undocumented workers often fill meatpacking jobs.

“Increased line speeds will hurt workers – it’s not a maybe, it’s a definite,” said Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union, which represents 15,000 poultry workers.

In his first term, President Donald Trump in 2019 issued a rule that allowed pork plants to run processing lines as quickly as they wanted. A federal judge blocked the rule in 2021 after a challenge from worker unions.

The Biden administration in 2023 allowed six pork plants to operate faster in a trial program for which USDA collected data on worker injuries.

Making the higher speeds permanent will increase stability for pork producers, the National Pork Producers Council industry group said.

USDA-funded data, released in January, found pork and chicken plant workers face higher risks than other manufacturing workers for musculoskeletal disorders, such as carpal tunnel syndrome.

Among six pork plants, higher line speeds were associated with greater risks for workers at one plant and lower risks at another, while line speeds did not make a statistically significant difference at four facilities, according to the data.

There was no association between greater speeds and higher risks for poultry workers, the data showed.

Data from the Bureau of Labor Statistics indicate occupational illness cases reported in the animal slaughtering and processing industry were six times higher than the average for all industries in 2022.

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