A lot of the wheatbelt has now had an October rain, although with storms predominating in some regions, the falls hit some farms and not others.
It is easy to assume that tonnage has been recovered, but that might depend on how the production forecasts at the start of October were being generated. If those forecasts were based on getting average October rainfall, maybe tonnage has simply been saved, rather than new tonnes added to the production outlook.
Certainly, there are some crops in NSW and Vic that will now be harvested. Growers are reporting that they may now harvest 25 to 30 per cent of their crop area, compared to nil before the rains.
At the same time though, wheat crops were still being cut for hay in parts of SA last week. Hay cutting is now confined to the later areas of the state, where grain yields tend to be higher, but where hay is always a viable alternative, particularly this year when supplies for the export hay market are tight.
The size of the Australian crop will remain questionable until we get a fair bit of the crop in the bin. The impact of drought, frost and late rains has left us a mix which is hard to project a final outcome from.
While some are still suggesting that the USDA forecast for an 18.5 million tonne wheat crop is still ambitious, it is hard to see them changing that number until we get concrete evidence of what has been harvested.
How large Australian exports will be is also a discussion point. On paper we should only be able to export about 10.5mt from and 18.5mt crop. The official July to June numbers will be higher than that though, because of exports since July 1 this year which are obviously made up of grain from last harvest.
We are also likely to see early shipments of new season grain from WA and SA, so that for a while the pace of our exports won’t reflect the drop in production for this year.
In fact the slowdown in exports from Australia won’t really hit until mid 2019, and by then the global market will be on the cusp of new exportable supplies from the 2019 northern hemisphere harvest. It could well be that the small crop from Australia this year causes barely a ripple in the global market if exportable supplies from elsewhere cover the shortfall from us in the second half of 2019.
Meanwhile, CBOT futures continue to trade within a range that began in mid September. In $A terms we have not been above $A272 a tonne since August. Although prices have not broken to the upside, at least the last two lows have been higher than the previous low.
The real problem seems to be that there is not enough news to keep feeding the bulls, particularly in terms of demand for US wheat. Until we can break to the upside, the risk remains that the market will eventually fail, and push down to the seasonal lows set in September, or the contract lows set in July.
Source: Stock and Land @ 2018-10