World wheat markets strengthened early this week, buoyed by a breakthrough in trade talks between the United States and China.
News that U.S. President Trump and Chinese President Xi have agreed on a truce to their trade war is expected to be treated favourably by global grain markets. President Trump said he would hold off further tariff increases for 90 days so the two counties could engage in new trade negotiations. President Xi said China would agree to make substantial purchases of goods from the United States.
Specifics of the arrangements were scant and lacked detail but were still treated favourably by investors. Global grain and oilseed markets edged higher last week in anticipation of a possible deal between the two countries and are expected to continue to strengthen on the news of the breakthrough.
United States wheat futures rallied on the news but closed well below the day’s highs as investors wait for more compelling evidence of China’s promise of substantial purchases which will be measured in export sales.
Direct impacts of any strengthening in global wheat prices on the drought affected east coast grain markets world be indirect, but a firming in the Western Australian grain markets would eventually be felt.
Harvest is also winding down in southern NSW but is still full steam ahead in Victoria. There were around 100,000 tonnes of grain into GrainCorp’s NSW storages in the past week to lift the total harvest delivered over a quarter of a million tonnes. GrainCorp reported around 120,000 tonnes of grain deliveries in Victoria in the past week.
Wheat quality has been excellent. Protein levels have been coming in at 13 to 14 pc with limited screenings problems. There has been robust competition amongst flour millers for the higher protein wheat grades. Hard 1 quality wheat is demanding a $20 premium above APW.
APW wheat values edged higher in southern NSW last week, aided by slow farmer selling. Melbourne APW was $10 higher at $430 delivered.
Yields have been highly variable depending on the area and even within areas. Some farmers have been pleasantly surprised how well crops have performed given the poor season while others turned out as expected. Disappointing.
Wheat harvesting in Southern Queensland is mostly complete. GrainCorp reported the delivery of 3200 tonnes of grain into its Queensland grain storage network in the week ending November 25. Last week’s grain deliveries lifted the total Queensland 2018 winter crop to a meagre 93,000 tonnes.
ABARES lowered its forecast for Australia’s 2018/19 wheat crop to 16.9 million tonnes, the smallest in a decade and down from the September forecast of 19.1 million tonnes. NSW wheat production was forecast at 1.98 million tonnes, which would be the lowest since 1995. Western Australia’s wheat crop was pegged at 9.8 million tonnes.
National canola production was forecast at a paltry 2.2 million tonnes, making it the smallest since 2010/11. The NSW canola crop was forecast at 152,000 tonnes down from last year’s crop of 620,000 tonnes.
ABARES said NSW sorghum plantings would increase by 20 pc to 180,000 hectares.
Yields have been variable even within areas. Some farmers have been surprised how well crops performed given the poor season while others turned out as expected.