Northern hemisphere weather not cause for concern yet

Northern hemisphere weather not cause for concern yet

Cropping
The December 19 wheat contract finished the week at $298 a tonne .

The December 19 wheat contract finished the week at $298 a tonne .

Aa

The wheat market finished the previous week on a high.

Aa

The wheat market finished the previous week on a high with US futures markets up US19 cents a bushel, equating to around $11 a tonne Australian dollars in the session after the Thanksgiving holiday.

This lifted the December 19 wheat contract to a whopping AU$298/t to finish the week.

The main driver of this rally was the short-covering needed post the holiday in the US, but with a reduced trading day and minimal selling of Soft Red Winter, we saw the contract balloon to levels not seen for quite some time.

Adding to this there was also some data released last week on soft wheat sowing across France, that came back at only 80 per cent when typically they are all but finished in France at this time of year.

So with 20pc of the crop still to be planted, there will likely be some French farmers who plant later than usual when the ground dries out.

But there will also be a significant number of acres that remain unplanted and could affect supply into next year.

So with the potential for fewer acres in France, and the news from the Russian Ag Ministry that their wheat crop might only be 75 million tonnes for next year, could we have a supply issue building for the northern hemisphere next year?

My answer to that would be steeped with caution, as we are still three weeks out from Christmas with plenty of time for the northern hemisphere crop to bounce back from a troubled start.

Yes, Ukraine and Russia have had a dry couple of months, and there has been a little too much rain through some European countries, but there is not enough doubt in the market yet to kill off massive amounts of the crop before the Christmas break and the onset of winter.

The situation in Australia is largely still driven by the east coast feed deficit, and identifying which port zone origins price best into the Brisbane and Newcastle ports.

The difference this year compared with last, is the size of the Victorian and South Australian crops, which are both doing their utmost to price into the northern zones.

Victoria will largely price into NSW via road, but Port Adelaide by boat is competing against the West Australian ports this year to ship grain around the country.

Western Australia had the intra-country grain shipment largely to itself last year, but with better than expected yields in South Australia and Victoria this year it will be a much different scenario.

The fact of the matter is Australia will have an exportable surplus this year, at least from the southern and western states.

They will have to compete into global markets at some point.

So the question remains will the world move higher on the back of production issues in the northern hemisphere and Australia picks up some of the slack, or will Australian grains have to move lower to compete into these markets?

As always the weather will be the key driver here.

Aa

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