Just when Australian commentators were lowering their projections for the Australian crop back to around 24 – 25 million tonne, the USDA raised its estimate by 1mt to 27mt.
In turn this contributed to an unexpected lift in global ending stock estimates, and put a negative tone into the wheat market.
The USDA is claiming that subsoil moisture levels were high enough ahead of the dry September to allow wheat crops to continue adding yield potential despite the view by locals that the dry finish is hurting yield potential.
The USDA has based their assessment on satellite imagery.
In reality, the dry spring is pulling a lot of yield potential from crops in all states.
For the growing season as a whole, only New South Wales was sitting on average or above average rainfall at the end of September.
A 27mt crop would be close to the second largest crop on record, and that does not seem likely given the overall lack of rainfall outside of New South Wales.
Production estimates were also raised for Canada (1mt) and the EU (1.5mt).
With a decline for the US crop of 2.29mt and adjustments to global consumption, global ending stock estimates were increased by 1.93mt. Globally the USDA are showing a 16.38mt year on year lift in wheat stocks.
However, when we drop China out of the numbers, the lift in global stocks is reduced to 1.38mt. The problem is, that this is now a lift, compared to a 550,000t decline suggested in the September USDA estimates.
With wheat stocks outside of China now showing a small year on year lift, it increases the chances of US wheat futures being lower year on year as we enter our harvest period.
Wheat prices in Victoria and New South Wales are still higher than this time last year. On Friday last week, prices in the Newcastle zone were running $12/t above year ago levels. In Victoria, where conditions this year are worse, cash prices for this year’s crop are holding a $17/t premium to last year’s early October prices.
However, Kwinana cash prices are running $12/t under prices on the same day last year, and South Australian prices are $7.50/t lower.
