Wheat futures in Chicago have begun to recover from the shock of the September USDA report, and have posted modest gains over five sessions before losing a little on Friday night last week.
On the weekly continuous chart it looks as though an upward trend line from the lows of last December remains intact, with a medium term move from 500 USc/bu, towards 550 USc/bu now underway.
The recent drop in US wheat prices has been useful because it has coincided with a modest lift in global wheat prices, led by EU and Black Sea prices. As long as US prices don’t overdo things on this next upward swing, US wheat may come into the mix for importers.
Ticking along in the back ground is also our own season. September has turned unseasonably dry across all states, putting crops under pressure.
Potential is being lost daily as crops get pushed to the limit. The feeling is that at least two million tonnes of production could come off current estimates.
That would push Australian wheat production down to around 17 to 18 million tonnes and force another revision of the global balance sheet in the October USDA reports. Global production estimates and availability of supplies for importers will need to be adjusted.
Other problem areas include Canada where early snow events have stalled harvest, as has wet weather in spring wheat areas of Russia.
Meanwhile, not just a lack of rain, but frost is also impacting our end of season with significant events reported from Western Australia to southern NSW. Assessments are being made, and affected crops are hitting the ground for hay production.
Canola is hard hit in South Australia, Victoria and NSW, while in Western Australia the impact on barley production was reported initially.
Wheat wasn’t hit as bad because it wasn’t as advanced when frosted.
Over the next couple of weeks or so more cold affected crops will become apparent, and if it remains dry more will be assessed for haymaking versus taking through to grain.
New season wheat prices are now above $400 per tonne in South Australia, supporting prices that are closing in on $500 per tonne (port basis) in northern NSW.
Price levels are the same in southern NSW, which means that the domestic market remains poised to suck grain in from Victoria and South Australia.
Current Australian prices are very high. This will make the task for exporters difficult, and ensure at this stage, that grain is diverted to the domestic market.
