Watch on quality, yields

Effect of rain on quality, yields unknown


Grains
UNCLEAR: Aside from possible damage due to recent rain, there's been debate about the actual size of Australia’s crop, with private forecasts lower than official estimates.

UNCLEAR: Aside from possible damage due to recent rain, there's been debate about the actual size of Australia’s crop, with private forecasts lower than official estimates.

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The size and quality profile of the Australian crop will remain an unknown for a few more weeks yet.

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The big wet has passed through eastern and southern Australia with somewhat mixed outcomes.

While rainfall might not have been as much, or as intense, as some forecasts were suggesting, there has still been a lot of rain across the eastern half of South Australia, all of Victoria and New South Wales.

Small areas of crop have been physically lost from flooding, hail and wind, however it will be the incremental loss to yield and risk to quality that will determine the largest part of the overall loss from the recent unseasonal weather.

One estimate is that about 4 million tonne of wheat remained unharvested in the rain-affected regions. That may be an underestimate, given the wheat harvest is only in its early stages in Victoria, and there have already been rain delays in South Australia and New South Wales that have slowed the pace of deliveries over the last week or so. There’s also debate about the overall size of Australia’s crop anyway, with official estimates still well above 20 mill t, while private forecasters suggest a crop closer to 18-19 mill t.

If our crop comes in at the lower end, with a serious level of downgrading on the crop still to be harvested, the supply of milling wheat from Australia could be quite low. It may also mean the amount of wheat exposed to the rainfall is smaller than estimated.

Basically, the size and quality profile of the Australian crop will remain an unknown for a few more weeks yet. International markets are watching this, but are not overly concerned because of the high levels of global stocks, strong supply of reasonable protein wheat from Russia and reports that Australia offered cheap wheat into Iraq last week, cutting out other major exporters.

The ongoing impact of slow export sales from the US has been to keep CBOT future under pressure. A new contract low was set early in the week as the market moved through a 20 US¢/bu trading range from the week before. However, the market finished on a positive note, back to levels seen as the base in prices for much of November. With a new month, and the southern hemisphere harvest ending, a base may be formed in prices over the next few weeks, which will set the tone into 2018.

At this stage, exports from the US and EU continue to be hurt by the late arrival of winter in Russia, allowing it to continue exporting at a record pace for this time of year. The market will also be watching the weather in the US to see if cold dry conditions develop in line with the La Nina event.

There are concerns that dry weather will limit crop development, and the crop could remain vulnerable to winterkill before an adequate snow cover arrives.

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