Crop forecast looks strong but uncertainty surrounds prices holding

High production may temper wheat prices

Grains
Australia could be in-line to produce another 30 million tonne wheat crop this year and put pressure on prices.

Australia could be in-line to produce another 30 million tonne wheat crop this year and put pressure on prices.

Aa

Australia could record a 30 million tonne wheat crop this season and pressure prices.

Aa

So much of the 2021 cropping season is yet to unfold, including the all-important spring period.

But recent rains have meant the New South Wales crop is starting to resemble that of 2020.

Unfortunately, the same can not be said for crops in some other parts of the country.

Farmers across Western Australia are having a fantastic start to the season and commentary suggests it may rival the best in memory.

Heading east, the excitement levels start to wane.

South Australia has experienced a varied start and farmers are generally looking for moisture.

Victoria is also a mixed bag.

Timely autumn rains throughout the Western District and north east are keeping those growers in good spirits, as opposed to those in the Wimmera and Mallee regions, who are still waiting for the season-opening "soaker".

After fantastic rains during March, NSW was looking at back-to-back record crops. But a dry April-May has tempered those expectations.

So far, June has been very fruitful and ensured the state's farmers will have the potential for another big crop.

Similar to NSW, Queensland has also had a great start to its cropping program - although the same can't be said for its State of Origin campaign.

NSW and WA have the biggest cropped areas in Australia and favourable conditions through these two states will certainly underpin the production for the whole of the country.

Recently the Bureau Of Meteorology (BoM) advised that Australia is entering into a negative Indian Ocean Dipole (IOD) period, which could last until Spring.

A negative IOD means Australia is more likely to get higher than average rainfall, which - combined with a mostly positive start to the season across large parts of the east coast - should provide farmers with additional confidence.

On the marketing front, continued changes to government policies, and ever-changing weather forecasts continue to influence Australian cash markets.

Promising rains for the US and a potential change in bio-diesel demand are this week's key drivers.

Big parts of the US corn and soybean crops are suffering from insufficient moisture, so precipitation has eased concerns for the short term.

As is the case in a tight world supply and demand picture, weather easing will have speculators nervous.

Adding to this, there is talk of a reduction in the bio-diesel mandate.

A big reason why we have seen such high pricing in canola is due to this strong demand.

If changes were to occur and mandates were eased, this could see a large reduction in demand for oilseeds and beans and loosen the tight carryout worldwide.

With so many bullish inputs into commodity pricing in recent times, it is always important to be cognisant of the fundamentals.

Today we are looking at a record world production for the coming year due to big crops expected through the European Union and Russia, in particular.

Should a negative IOD event come to fruition, Australia could record another 30 million tonne wheat crop.

Reductions in demand, as discussed earlier, may spell the end to this high price environment.

Aa

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