Global wheat supplies have tightened, pushing wheat values in a range of markets to their highest values since 2008. We see that in our own market, with the $A value of Chicago Board of Trade futures continuing to trade in a range not seen since the massive price spike in early 2008.
Our cash market for both new and old season wheat is reflecting this as well, with new season prices moving above $350 a tonne, and close to $380/t in WA. Price levels like these have traditionally been reserved for drought years, with our market responding to domestic issues, not international price levels.
The various futures markets around the world will continue to bounce around as final harvest results from the northern hemisphere get bedded down. The markets will also be watching the Australian crop, to see how big it can get, and whether it will balance out some of the ongoing downgrades being put forward for the Russian, European Union and Canadian crops.
The Australian crop had a setback with below average rainfall across the country for August, but September has seen a good start across many districts of NSW and Victoria.
This week's monthly United States Department of Agriculture Report will provide further insight into the current global balance sheet, but there will be ongoing uncertainty as estimates for the various crops around the world are finalised.
We also have to consider demand, with high prices likely to curtail some consumption. As well, economic issues from the fallout of the COVID-19 pandemic will have some impact on wheat demand as the impact ripples through consumer markets and the demand for meat, as well as demand for biofuels sourced from grains in general.
From here though, another factor will come into play, and that is the planting of the 2021/22 winter wheat crop in the US, Europe and the Black Sea.
With strong wheat prices we would expect acreages to remain firm, but what the market will be watching is soil moisture levels, and the pace of planting.
Already there are some concerns about soil moisture levels in the US Southern Plains. At this stage only about 11 per cent of Kansas is drought declared, but already that is being seen as enough to possibly delay plantings.
Most years there is a degree of drought across those parts of the US. However, when global supplies are already under pressure, the market will be sensitive to the next new crop, until it is convinced that supplies will be replenished.
Concerns about establishing the next winter wheat crop should provide support to wheat prices over the next eight to 10 weeks. Over our summer it could be concerns about snow cover and freeze damage.
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