Australian wheat near record, but grain supply and demand stay tight for now: Grain market daily

Wednesday, 8 September 2021

Market commentary

  • UK feed wheat futures (Nov-21) fell £0.60/t yesterday, to close at £187.65/t.
  • The US Gulf Coast grain export facilities are still dealing with the aftermath of Hurricane Ida, with reportedly around a dozen terminals still closed yesterday due to power outages.
  • The USDA’s latest crop progress report was released yesterday as at 5 September, one day later due to a US holiday. Maize crops rated ‘good’ to ‘excellent’ fell 1 percentage point (pp) to 59%, whereas Soyabean ratings gained 1pp to 57%. US spring wheat harvest was at 95%, up from the 5-year average of 83%. Winter wheat planted totalled 5%, on pace exactly with last year.
  • Despite declining US maize crop conditions, reports from Crop Watch producers in western Iowa are that late season rains may have boosted yield outlooks. USDA’s updated view on yields is due on Friday.
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Megan Hesketh

Analyst

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Australian wheat near record, but grain supply and demand stay tight for now

ABARES released their latest crop report this week, boasting well above average production forecasts for a second year in a row.

The release eased some global supply concerns, with wheat production forecasts increased by 17% to 32.63Mt. This was down to ‘exceptionally favourable’ growing conditions in June and July. AMIS too stated in their last report, that growing conditions had been exceptional with ample rainfall and soil moisture.

For rapeseed, the report increased forecasted production to a record high of 5.04Mt. A large Australian crop boosts global supply, considering heat damage to the Canadian canola crop this season. With a tight EU supply and demand balance, especially with some major exporters choosing non-EU destinations, this may ease some global availability concerns. The Australian rapeseed harvest is due to begin in October.

However, something to watch over the next 3 months is rainfall. The outlook for spring rainfall September to November, issued by the Bureau of Meteorology last week, is very likely to exceed median in both eastern and south Australia. This is something to watch, as could delay harvest and/or impact on quality.

What does this mean for global availability and UK grain prices?

Global wheat supply looks tighter than expected this season. The news of a large Australian wheat crop pressured UK prices somewhat. Though, Tuesday’s UK feed wheat (Nov-21) contract only fell £0.60/t to close at £187.65/t. The Paris milling wheat contract remained unchanged at €242.25/t.

Why? Well, there are still many factors playing into a tight market before the Australian wheat harvest in November.

Global buyers are still concerned about Black Sea supplies, according to Refinitiv. Russian export prices (as the biggest global exporter) rose again last week for the eighth week in a row. Sovecon pegged wheat prices as $301.00/t, the highest in 7 years.

Steady wheat demand is also helping to keep prices elevated. Tenders from countries in north/west Africa and Asia are helping to support prices. The latest tender from Egypt’s GASC for an unspecified amount of wheat has a deadline of today.

Now the market looks to the updated USDA’s world supply and demand estimates due on Friday. Points to watch for include the USDA’s yield and area figures for maize and soyabeans, wheat production figures of major wheat exporters, and Chinese domestic supply and demand figures across the board.


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