DID the Australian wheat crop get bigger with recent rains or did it just stop getting smaller?
It is easy to assume that tonnage has been recovered, but that might depend on how the production forecasts at the start of October were being generated.
If they were based on getting average October rain, maybe tonnage has simply been saved, rather than new tonnes added.
Certainly there are some crops in NSW and Victoria that will now be harvested. Growers are reporting they may now harvest 25 to 30 per cent of their crop, compared to nil before the rains.
At the same time wheat crops were still being cut for hay in parts of South Australia last week.
Hay cutting is now confined to the later areas of the state where hay is always a viable alternative.
The size of the Australian crop will remain questionable until we actually get a fair bit in the bin. The impact of drought, frost and late rains makes it hard to project a final outcome.
While some are still suggesting that the USDA forecast for an 18.5 million tonne wheat crop is still ambitious, it is hard to see them changing that number until we get evidence of what has been harvested.
How large Australian exports will be is also a discussion point. On paper we should only be able to export about 10.5 million tonnes from a 18.5 million tonne crop.
The official July to June numbers will be higher than that, because of exports made up of grain from last harvest.
We are also likely to see early shipments of new season grain from Western Australia and South Australia, so that for a while the pace of our exports won’t be reflecting the drop in production for this year.
In fact the slowdown in exports from Australia won’t hit until mid 2019, and by then the global market will be on the cusp of new supplies from the 2019 northern hemisphere harvest.
It could well be that the small crop from Australia this year causes barely a ripple.
Meanwhile, CBOT futures continue to trade within a range that began in mid September.
In Australian dollar terms we have not been above $272/t since August.
Although prices have not broken to the upside, at least the last two lows have been higher than the previous low.
The real problem seems to be that there is not enough news to keep feeding the bulls, particularly in terms of demand for US wheat.
Until we can break to the upside, the risk remains that the wheat market will eventually fail, and push down to the seasonal lows set in September, or to the contract lows set in July.
