THE November US Department of Agriculture Report both surprised, while also delivering against expectations.
The surprise came from a lift in global wheat supplies with a lift in production and in opening stocks, while at the same time reducing the Australian crop as expected, and also lowering production estimates for Morocco, Pakistan and Ukraine.
The change to global stock and production numbers are more annoying than of real substance, because it involved changes to Chinese data, with some previously ignored government stocks being included in the data across all grains.
It is largely irrelevant though because China does not export wheat, and has a fairly low but stable level of imports.
When China is excluded from the production data for this season, global production was down 1.9 million tonnes from the October estimate, led by a one million tonne downgrade for the Australian crop, down to 17.5 million tonne.
Some would suggest that this is still too high, but it is really hard to gauge because of the late rains in Western Australia and NSW, and the final impact of dry conditions elsewhere, along with frost and acreages taken out for hay.
Global exports were reduced, down 1.6 million tonnes, mainly on the back of lower Australian exports. Our exports are projected at 11.5 million tonnes.
The closely watched US figures were basically left unchanged, apart from a small lift in domestic use to reflect the forecast lift in acreage to be planted to wheat this year.
The final US winter wheat acreage is still uncertain though because of the delays to planting from the wet weather, which has slowed planting, and slowed the soybean harvest.
Importantly for the US, its export projections were left unchanged at 27.9 million tonnes, reflecting a 3.38 million tonne year on year increase.
This will remain the focal point for the market as it watches to see if that target will remain realistic given the slow start to exports thus far.
So, it will be the pace of US exports, and projected exports, that will remain the focus for the US futures markets. The markets will continue to work to keep US wheat price competitive against Russian wheat.
For now that indicates that futures will remain under pressure until there are signs that the pace of Russian exports is slowing.
As long as the Australian dollar declines against a rising US dollar, we might not see much impact from falling futures in our market.
However, every time it looks as though the China/US trade spat might be resolved, our dollar rallies because of our strong trade links with China and the prospect of a lift in Chinese economic activity.