WORLD grain futures have lifted across a range of commodities in the past week on the back of a US Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) report that lowered international production.
And there may be further production cuts to come, with the report featuring an extremely generous assessment of the Australian crop.
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Australian grain analysts were struggling to see how the WASDE report came up with an Australian wheat crop of 18.5 million tonnes.
Even the highest local estimates are struggling to plug in a number much in excess of 16.5m tonnes.
This figure was also compounded by a USDA estimate of 5.4m tonnes of Aussie carryover, leading it to forecast Australia would forecast 13m tonnes of wheat.
Most local estimates are for exports in the range of 8m tonnes.
“The industry here is not reacting to the USDA numbers on Australia,” said Nick Crundall, Market Check head of strategy.
“The issue will simply be finding how far off they are – it is one of those things when you’ve got an agency where numbers take a bit of time to put through, it does not react as quickly to a change in conditions like we have had.”
Mr Crundall said when combining the likely shortfall in Australian grain with other spots where the USDA forecasts seemed high, such as Russia, it could mean further tightening of world balance sheets.
“If you pencil in the 7-8m tonnes of exports most people here are using and if the Russian export figure does turn out to be a bit high then all of a sudden there’s another 10m tonnes of wheat that needs to be sourced elsewhere,” Mr Crundall said.
Tobin Gorey, Commonwealth Bank analyst, said the supportive news was not limited to Australia and Russia.
“Crops in Argentina, Australia and Canada are all being revised lower,” Mr Gorey said.
Reports from Argentina are saying initial yields from the first deliveries of the season are below expectations, with drought and frost taking their toll.
Gregor Heard
Gregor Heard is Fairfax Ag Media's national grains industry reporter, based in Horsham, Victoria. He has a wealth of knowledge surrounding the cropping sector through his ten years in the role. Prior to that he was with the Fairfax network as a reporter with Stock & Land. Some of the major issues he has reported on during his time with the company include the deregulation of the export wheat market, the introduction of genetically modified crops and the fight to protect growers better from grain trader insolvencies. Still involved with the family farm he is passionate about rural Australia and its people and hopes to use his role to act as an advocate for those involved in the grain sector. Away from work, he is a keen traveller, having spent his long service leave last year in Spain learning the language.
Gregor Heard is Fairfax Ag Media's national grains industry reporter, based in Horsham, Victoria. He has a wealth of knowledge surrounding the cropping sector through his ten years in the role. Prior to that he was with the Fairfax network as a reporter with Stock & Land. Some of the major issues he has reported on during his time with the company include the deregulation of the export wheat market, the introduction of genetically modified crops and the fight to protect growers better from grain trader insolvencies. Still involved with the family farm he is passionate about rural Australia and its people and hopes to use his role to act as an advocate for those involved in the grain sector. Away from work, he is a keen traveller, having spent his long service leave last year in Spain learning the language.
