Wet weather has continued to hit the Australian grain harvest, with hail and heavy rain in parts of Western Australia, South Australia, most of Victoria and across New South Wales.
In NSW’s north, the ongoing rains will continue to bolster the outlook for summer crops. But elsewhere, it is damaging ripe crops and delaying harvest.
The forecasts at the start of this week indicated further rainfall that would mainly impact Eyre Peninsula in South Australia and central west regions in NSW.
Things are getting to the point where quality will become an issue.
The supply of feed grains for eastern states markets is not at risk, but any downgrading will tighten milling wheat stocks and higher protein wheat supplies.
In global markets, a firming cash market in the US provided some support for futures into the end of last week, but global prices continue to be under pressure.
The latest price for Russian wheat into the Middle East was a little lower than the previous sale.
It has also been noted that Russia is offering wheat well beyond its normal shipping window. Russia is also pitching for sales to Brazil, having established a couple of years ago that they can supply high protein wheat to that market. Brazil is normally supplied by the US if Argentine supplies fall short.
With the wheat market probably in a neutral to bearish position, a few more projections are coming in for the 2018 season.
Planted acres in the US are expected to fall again, with one analyst predicting a 919,000-acre drop in the US winter wheat crop. But they do expect to see a rebound in spring wheat acres after last year’s drought-affected crop. That would leave the US crop just 27,000 acres down.
There is also expected to be a decline in the area planted to wheat in the EU in 2018. This is a response to weak prices and overly wet weather which has slowed planting in central Europe.
All things being equal, expect a drop in the global wheat crop in 2018.
Even a return to normal seasonal conditions should see the Black Sea crop pull back, while reduced acreages planted elsewhere should also work to keep production increases capped.
What is unknown is whether the market will plunge lower in the short term, undermining the price base for Australia’s current harvest period.
At this stage, wheat futures seem to be in a holding pattern, trading most of the time between 420 and 430 US¢/bu on the December contract.
However, things are about to roll over to the March contract, and it is trading in a 435 to 450 US¢/bu range. That will represent a lift in spot prices that the market might not be quite ready for.
