THE October US Department of Agriculture (USDA) report provided another round of support for US wheat futures.
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US wheat stock estimates were lowered by 1.21 million tonnes, and global stock estimates were lowered by 3.79 million tonnes, to 192.59 million tonnes.
Behind the figures was a modest lift in global production that was outweighed by a significant lift in consumption estimates, as large volumes of feed wheat, and much lower wheat prices, drive increased use in key consumption markets.
Changes to global production estimates were interesting.
Estimates for the European Union (EU) were lifted another three million tonnes where, despite having a high level of downgrading, production has been very strong.
There were also 500,000t increases for Pakistan and Ukraine.
The bulk of these increases to production were cancelled out by downgrades to crops in Kazakhstan, Algeria, Australia, Canada and Argentina.
The northern hemisphere adjustments were on the back of changes to official government statistics.
In the southern hemisphere the drop for Australia is reflecting the dry spring, and in Argentina it is reflecting wet conditions that have reduced plantings.
At the moment the USDA is still reporting 25 million tonnes as its estimate for Australia.
The last official estimate from Australia was from ABARES in early September, when it was projecting a crop of 24.2 million tonnes.
Since then there has been very little rain across southern Australia, and August and September rain elsewhere should really only hold yield potential already present at the end of August.
If we are realistic about the drop in yield potential across southern NSW, Victoria and South Australia as a result of near-record low rainfall recordings of the August to October period to date in parts of those regions, we can easily see another two million tonnes coming off the Australian crop.
If it continues to remain dry for October, we could lose another 800,000t.
If we assume that ABARES had it right in September (really based on rainfall to the end of August), then the Australian crop should be about 21.4 million tonnes, not 25 million tonnes as assumed by the USDA.
Adjusting the Australian crop down to 21.4 million tonnes has the potential to pull another 3.6 million tonnes off the global ending stocks estimates for 2014-15.
That would leave the year-on-year increase in global stocks at just 3.41 million tonnes without an upgrade in output from elsewhere.
It would also feed into export numbers from Australia, basically reducing exports by at least three million tonnes, down to 16.5 million tonnes.
The shortfall from Australia will need to be made up from elsewhere.
The EU can easily cover any drop from us, but while it may be able to fill a gap for feed wheat, it will be harder to fill any gaps in milling wheat demand.
The US and Canada will also find it relatively hard to fill a gap in milling wheat demand left by reduced exports from Australia.
Its stocks are not that great, and it has its own quality issues to deal with.
With it rapidly getting too late to turn southern crops around, Australia is facing both a reduction in quantity, and potential quality issues from the southern export based regions of the country.
This should become supportive of the global price base for milling wheats, as well as continuing to support domestic prices within Australia, which have continued to show significant premiums to US futures prices.
Malcolm Bartholomaeus is the market analyst for Bartholomaeus Consulting, Clare, South Australia.
