US officials cut Aussie wheat hopes, but stand by export forecasts

23.10.2017

US officials stood by expectations for near-average Australian wheat exports this season, despite following other commentators in downgrading their estimate for the drought-hit harvest to a 10-year low.

The US Department of Agriculture's Canberra bureau cut to 20.0m tonnes its estimate for the newly-started harvest, citing the "poor rainfall and high temperatures across most wheat-growing areas" over much of the growing season.

The downgrade took the forecast 1.5m tonnes below the USDA's official figure to around the middle of the range of market expectations, which come in at about 17m-22m tonnes according to estimates heard by Agrimoney.com.

Export outlook

However, the bureau stood by existing USDA expectations of Australian wheat exports despite the weaker production figure.

The estimate for exports was kept at 18.0m tonnes the forecast for 2017-18 exports on an October-to-September basis, the local marketing year.

For the marketing year starting in July, more commonly used internationally, the bureau pegged exports at 20.0m tonnes, in line with the USDA figure, and ahead of the 18.15m tonnes expected by Abares, Australia's official commodities bureau.

Australian exports have averaged 18.6m tonnes over the last five marketing years, on an October-to-September basis.

'Closer to export parity'

The bureau flagged that while production prospects had declined for this season, Australia's stocks still remained flush from last year's bumper 35.0m-tonne crop.

"Part of these [2017-18] exports are expected to come from a drawdown of stocks from the record 2016-17 harvest," the bureau said in a report.

Furthermore, while prices in New South Wales and Queensland, where drought has hit particularly badly, were "unattractive" for exports, that was not the case for all states.

"In Victoria, South Australia and Western Australia, domestic grain prices are closer to export parity," the level needed to compete on world export markets.

Location, location, location

Indeed, the wheat supply dynamics have made for interesting price flows for Australian traders, with prices in the southern and western ports caught between the support to prices from demand from livestock feeeders in the likes of Queensland and northern New South Wales, and the need to compete on export markets.

Trading house Nidera Australia said last month that "it is the location of the required grain relative to the key demand points and the propensity of the grower to sell, that will present the biggest challenges for the domestic feed grain sector over the ensuing twelve months".

It flagged a "constant stream of trucks carrying grain from the south to the north" – from areas where wheat prices had fallen to compete on international markets to those in the likes of Brisbane and the Darling Downs where values had approached import parity.


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