We continue to see downgrades to production estimates from various agencies for French, German and Russian wheat crops. These seem to be coming through on top of the adjustments already made and reflected, in large part, in September's United States Department of Agriculture Report.
If the reports are correct, then we are likely to see further pressure on the global balance sheet for wheat in the October, and possibly November, USDA Reports.
However, at this late stage of the northern hemisphere season, it is not new weather issues generating the production downgrades, it is delays in collating harvest data, and/or underestimation of the impact of seasonal conditions that occurred some time ago.
On top of that, there is a suggestion that the acreage to be planted to winter wheat in Russia will be down this year compared to last year. That begins to feed into market conditions for 2022 and will come on top of the normal risk/uncertainty that surrounds the northern hemisphere growing season most years during our late summer and autumn.
Either way, we are likely to see some ongoing support for Chicago Board of Trade wheat futures into our own harvest, and into early 2022, until we can assess whether global wheat supplies will rebound during next year.
In favour of a rebound in global wheat supply are the current high prices. $A values for CBOT wheat futures above $A350 a tonne are rare. Wheat growing is profitable at these price levels, which are also reflected generally in other parts of the world.
High prices tend to fix high prices as, globally, farmers respond and plant as much as they can of the crop affected. However, wheat is not the only crop with high prices. Most grains are enjoying buoyant price levels, and for some farmers, wheat won't be their most profitable option.
Meanwhile there has been an expectation that a big crop from Australia (currently estimated as the second largest on record) will ease supply concerns heading into the end of this year.
That may be under a cloud at the moment, with state-based crop forecasters pulling tonnage off the WA wheat, barley and canola crops. The problem has been frost and a dry spring thus far. In response, the Grain Industry Association of Western Australia has pulled 700,000t from its estimate of the WA wheat crop.
As well, dry spring conditions are building across SA, north west NSW, and Queensland, putting in doubt our ability to meet the current forecast production for 2021.
Right now, it appears that the Australian wheat crop is going backwards with little respite in sight. There are also drought issues in Argentina, which will add to the pressure on global supplies.
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