THE International Grains Council are projecting a smaller global wheat crop this year, based on a projected 1.4 million hectares drop in planted area.
It would be the smallest wheat area in six years.
The decline comes on the back of difficult conditions at planting time in parts of the EU, India and Russia.
Partially offsetting these acreage declines will be increases for the US and Canada.
The decline in area will flow over to generate a decline in global production, and for the first time in six years, a decline in global stocks.
Stock levels will still be high though, and remain at their second highest levels on record.
Importantly, the decline in wheat stocks will be in exporting countries.
The US Department of Agriculture are also projecting a decline US wheat stocks during 2018-19, despite seeing exports continue to fall.
US wheat stocks are expected to fall to 25.3 million tonnes.
That is down from 27.47 million tonnes expected ending stocks for this year.
That level of stocks decline is not enough.
It still leaves the US with a burdensome level of wheat in storage.
US wheat exports will continue to be challenged.
Global consumption will increase, but the USDA are suggesting that exports from the European Union will lift, Argentina will continue to expand their crop, and Russia will enter the new year with large carryout stocks.
That will see Russia dominate global exports again even if their crop is smaller.
The current projections for the US allow for an increased area planted but are also assuming that the current drought conditions will carry through and affect final output.
Currently 42 per cent of the US winter wheat crop is experiencing drought, with the USDA suggesting that only 83.4pc of the planted area will actually make it to harvest.
We need to be aware that abandoned acres will likely be in lower yielding areas, and that timely rains could easily lift final production on the remaining areas anyway.
The current projections from the IGC and USDA are modestly positive for the price outlook for wheat.
However, the real gains will come if drought conditions somewhere, are significant enough to bite harder into global wheat production.
At the moment the dry conditions in the US are capturing some attention.
Certainly, the market is trading from day to day on the back of weather forecasts in the absence of any new hard data to trade.
We also have the situation in Canada and Australia, where subsoil moisture conditions have been rundown during 2018, leaving this year’s crop at the mercy of in season rainfall events.
In Canada a lack of snow in some areas will also reduce topsoil moisture as their growing season gets underway.
In Europe and the Black Sea region the current concern is a burst of cold weather.
A number of crops are vulnerable because of the mild winter to date, and if snow cover is not adequate, there could be some winterkill losses.
We are probably looking at a set of weather stories as bad as they have been for some years for this time of the year.
However, we also have to note that mild winters across Europe and the Black Sea tend to generate high yielding crops because of the extension to their growing season.
We need a weather issue this year, but there is still a long way to go.