Weather cocktail gives wheat a little lift

Weather cocktail gives wheat a little lift

Cropping
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Wheat supply for 2019/20 is currently being adversely impacted by a range of different weather concerns around the globe.

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Wheat supply for 2019/20 is currently being adversely impacted by a range of different weather concerns around the globe.

The cocktail of weather lending support to the market includes dryness, hail, extreme cold and frost and heavy snowfall.

Due to this, Rabobank has lifted its Chicago Board of Trade wheat expectations and we now see it trading between US500 cents a bushel and US515c/bu throughout 2020.

This will be a welcome, albeit small, lift for Australian grain farmers who have otherwise been relying on tight local conditions to lift domestic prices.

In the US and Canada, the weather concern is low temperatures and snowfall.

In Alberta and Saskatchewan, the spring wheat harvest is 20 per cent and 30pc respectively behind, compared with the five-year average due to unseasonably cold weather and blizzards.

The United States Department of Agriculture revised Canadian wheat production down 1pc to 33 million tonnes this month, and we may see a further decrease if the unfavourable weather continues.

Meanwhile, in the northern US, their spring wheat harvest is only 94pc complete when it would normally be complete by the second week of October.

In Argentina, it is ongoing dryness - as well as hail and frost over the past month - that has delivered supply downgrades. Expectations for Argentina's wheat harvest have already been reduced by the USDA, but down to what would still be a record 20.5 million tonnes, and up 5pc year-on-year.

However, the Rosario Board of Trade has more recently cut its wheat forecast to 19.8 million tonnes, with an increased area planted to wheat this year the factor keeping new crop supply prospects above last year's harvest volume, as yields fall below last year's.

Dryness has also been affecting the wheat outlook in southern Europe and the Black Sea region.

Planting has been delayed due to below-average rainfall. However, with the arrival of rains over the last fortnight and with a favourable rainfall forecast for most of Europe this month, the season is likely to pick up.

Forecast higher than average temperatures during the month should also assist farmers to get back in the fields and catch up on planting progress.

And of course it is dryness, and frost in parts, that is Australia's contribution to this weather cocktail.

As the headers get rolling in earnest in Western Australia and South Australia, Queensland finishes up and NSW considers reaping the little that it has, it is only in Victoria that we expect close to an average harvest volume.

We forecast that Australia's winter crop harvest will be just 27.7 million tonnes this year. That is down 9pc on last year's disappointment, and this keeps it 31pc below the five year average.

Unlike last year, there is not going to be a bumper Western Australian crop to prop up the national performance.

The USDA still has Australia producing 18 million tonnes of wheat this year in their calculations. By our estimates, they still have more than two million tonnes to write down.

But despite the cocktail of weather concerns around the globe, and even with further write downs for Australia, global production is still expected to be up 3pc, and stocks to grow 4pc over the year.

The cocktail of weather required needs to be much more potent before we get a serious, rather than just a little, lift in global wheat prices.

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