AUSTRALIA will face a shortage of high protein milling wheat in light of the big wet down the east coast this season.
Grain industry analysts are warning that a best case scenario will see large volumes of lower quality milling wheat, such as ASW, while further rain will see downgrades into general purpose or feed quality classifications.
Andrew Whitelaw, commodity analyst with Episode 3, said the concentration of rain over Australia's major high protein wheat producing regions in northern NSW and southern Queensland over the course of the entire growing season meant it was always likely that there would be a smaller high protein crop than usual.
However, he said the recent rain through the Riverina and into Victoria meant crops there would be lower in protein than usual, meaning lower supplies of classifications such as APW.
Mr Whitelaw said there would be good volumes of milling wheat out of Western Australia but added the west was not a traditional big supplier of high protein wheat, mainly due to soil types meaning it was hard to get higher levels of protein in the grain.
"South Australia may have some volumes of high protein wheat but again the rain and the cool finish continues in that part of the world too so although yields will be excellent in many parts there will not be that high protein product we see in drier years," Mr Whitelaw said.
Tobin Gorey, commodity analyst with Commonwealth Bank, said he had toured key parts of the southern cropping zone through Victoria and southern NSW and said there was a significant amount of water about.
"There will be large pockets of damage, there will also be good volumes of grain where the crop hasn't got too wet but given the cool and wet season we're not going to see much high protein wheat around," Mr Gorey said.
"The issue is what happens from here, we could see things fine out and dry up and we're unlikely to see greater areas losing yield or being downgraded but if, as is predicted, there is further heavy rain then that area with lower quality is likely to rise," he said.
"At present the rain is falling on crops that are still not yet ripe so it is not doing too much damage in terms of quality apart from keeping protein low but if the rain drags on into harvest that is where we won't just see ASW quality grain but larger volumes of general purpose and feed."
James Maxwell, Australian Crop Forecasters, said the market had been factoring in yield losses and quality downgrades through NSW for months but added this was now likely to extend into Victoria.
"We're seeing large scale riverine flooding in parts of north central Victoria, which will mean there will be yield losses but from a quality perspective the wet and cool conditions mean there is likely to be good volumes of grain where it has not been washed out but the protein will be low," Mr Maxwell said.
"At present most of the crop still intact is still very much still in the game but its if we keep getting the rain as it nears maturity that we will start to see concerns about downgrades to feed," he said.
Mr Whitelaw said spreads between higher protein APW and ASW wheat were expanding rapidly, with levels close to $150 a tonne on offer in NSW.
He said spreads were currently already higher than in 2010 when a similar volume of lower quality grain was produced due to wet conditions through the spring and early autumn.
However, he said there was a silver lining in that the price for lower quality grain was remaining stable and premiums for APW and better grades was rising.
"We are not seeing the feed and general purpose wheat prices tank, there is plenty of demand globally for feed grain so there will be a home for any lower protein or weather damaged wheat."
"Like always growers will have to think carefully when making their marketing decisions and look closely when selling grain through things such as multigrade contracts."