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 NSW. In the north of NSW, 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 some further rain that would mainly affect Eyre Peninsula in South Australia, and central west regions in NSW.
We are getting to the point where quality issues 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 wheats 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.
Also, Russia is offering wheat well beyond its normal shipping window. Recent milder weather is allowing more grain to be moved.
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.
With the wheat market probably in a neutral to bearish position, we are seeing a few more projections 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 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. Soft wheat sowings are projected to be down by 300,000ha.
While farmers in the US, Canada and the EU may be responding to lower wheat prices and reducing acreages, we are not going to see that happen in the Black Sea countries. We will be relying on less than ideal growing conditions to affect the size of the Russian and Ukraine crops.
All things being equal we would 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 we don’t know is if the market will plunge in the short term, undermining the price base for our current harvest.
