Australian wheat price lifts following global downgrade

18.07.2018

AUSTRALIAN wheat futures have risen $7 a tonne after a forecast drop in world wheat production by the US Department of Agriculture sent shockwaves across the global grain industry.

The July World Agricultural Supply and Demand Estimates report, released last week, estimated a 8.43 million tonne drop in global wheat production to 736.25 million tonnes, with the report scaling estimates down from 744.69 million tonnes in June.

It will be the smallest world wheat crop in three years.

Australia is predicted to harvest only 22 million tonnes of wheat this year, a fall of more than 8 per cent from the 24 million tonnes in the June forecast.

In market comments published on Monday, Commonwealth Bank analyst Tobin Gorey said the WASDE’s lower estimates of wheat production had affected global prices with new crop futures seeing “hefty gains.”

“The ASX East January is now just a dollar behind the highs of early June,” Mr Gorey said. The January 2019 wheat contract was $334 a tonne yesterday.

The USDA report estimates wheat production across Europe will drop to 145 million tonnes from 149.40 million tonnes, while in Russia and Ukraine production was scaled down 2.63 per cent to 92.5 million tonnes.

Meanwhile, in the US, wheat production estimates rose almost 3 per cent to 51.21 million tonnes.

AvantAgri Australia analyst Malcolm Bartholomaeus said this was the first year since 2007 that there was a combination of production issues around the globe.

“The one thing that did surprise me is that they’ve already started to write off the Australian crop a bit,” he said.

“For Australia, it’s just staying too dry and too cold across too much of the continent.”

He said excluding the US and China, other major exporters were facing sharp falls in stocks.

“Even through the US have high stocks, they won’t be able to fill the gap,” Mr Bartholomaeus said.

“If 2019 global wheat production recovers by 18 million tonnes, for example, it will have no effect on stock levels outside the US and China.

“We’re going to have to have a substantial lift in global production next year.

“It’s a train wreck on its way.”


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