Recent weeks have seen headlines captured by increasing tensions between Iran and Israel. RaboResearch general manager Stefan Vogel poses the question – “so, what does the latest conflict unfolding in the Middle East mean for our grain sector?”.

Mr Vogel said in terms of grain markets, “we expect the impact to be rather muted, even if the conflict between Iran and Israel escalates further”.

“Israel is not a major importer of grain, although Iran imports noteworthy volumes of about 15 million tonnes per year, contributing 45 per cent of the country’s annual consumption,” he said.

Mr Vogel said especially important for Iran are imports of wheat (three to eight million tonnes per annum), barley (two to three million tonnes) and corn (six to nine million tonnes.). “However, it is likely the country will continue to find required volumes in the global market as well as suppliers who will deliver.”

For Australian exporters, he said, there is unlikely to be a direct impact. “Australia exports only small volumes of grain to Iran, with Russia generally a major supplier of wheat and barley and Brazil of corn.”

The Rabobank analyst said an impact on canola markets is also unlikely as Iran relies on (quite small) volumes of soybean, soybean meal and sunflower oil imports and does not engage very much in the canola trade.

“It also seems unlikely there will be a noteworthy impact on canola prices as a result of volatile energy markets for crude oil, as Iran’s oil exports are relatively small in the global context.”

Mr Vogel said an escalation of tensions might further impact shipping, but ships have already been diverted away from the Suez Canal and Red Sea, with only a small impact seen on freight rates for grain vessels. “This should, though, continue to maintain Australia’s freight advantage into Asia over its competitors from the EU and Ukraine with their shipments generally having to go around Africa.

“More important for Australian grain markets will be the weather in coming weeks during planting, with several areas – especially in Western Australia and South Australia – in need of rain,” he said.

Also of significance, Mr Vogel said, is the progress of corn and soybean plantings in the US and if the quite-high area reductions forecast by the US Department of Agriculture (USDA) materialise or if farmers plant more than expected due to favourable weather.

“May weather will also be crucial for yields across the northern hemisphere grain belt, where so far Russian, Ukrainian and south-eastern EU wheat areas have faced well-below-normal spring rains, as have some grain regions in Canada.”

Overall, he said, global grain forecasts for 2024 are slightly reduced with the International Grains Council (IGC) and USDA marginally cutting their estimates in April. For grain prices to increase, however, a much more severe weather-related production decline will be needed.

Mr Vogel said canola prices in Australia will be influenced by the upcoming closure of the EU import window, with the EU’s own harvest only three months out. “This – in combination with imports from Ukraine – will diminish most of the EU’s need for Australian canola. Still, due to acreage reductions, the EU’s 2024 canola crop should decline from last year’s level and additional volumes from Ukraine seem unlikely to fill the gap, so Australian trade might get another demand push once we harvest our crops in early 2025.”

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