Global wheat supplies continue to swell according to the latest monthly update of the keenly watched USDA world supply and demand estimates report.
As expected, the USDA slashed estimates of the EU wheat crop atfer a wet spring which dramatically lowered yields. But this was more than offset by production increases in other countries including Russia, Ukraine, the US, Canada and Australia.
The EU wheat harvest was lowered by 9 million tonnes from last month to 147.5mt, due to excessive rains in some of the bloc’s major growing regions, particularly France. This would make it the EU’s smallest wheat harvest in three years but the French crop is said to be the worst in 30 years.
Despite sharp reductions in the size of the EU wheat harvest, global supplies have continued to expand as a result of larger harvests in most of the major exporting countries. USDA raised its estimate of Russia’s wheat crop by 7mt from last month to a record large 72mt. They also raised fellow Black Sea countries, Ukraine and Kazakhstan, by a further 4mt collectively.
Favourable North American growing weather also saw the USDA raise its estimates of both the United States and Canadian wheat harvests.
Australia’s 2016/17 wheat production forecast was increased by 1mt to 26.5mt, according to the USDA. Many private forecasters still view this as conservative.
Lower wheat prices are helping to spur additional demand, which saw global wheat stocks contract by a modest 900,000 tonnes, but remain at a record large 253mt, which is 11mt up on last year.
Changes in other crops were also seen as bearish world feed grain prices. This was certainly the case for corn, where the USDA raised its estimate of the US harvest by a massive 15.6mt to a record large 385mt. The US sorghum production was also increased by 13 per cent to 12.1mt, which is expected to intensify export competition for Australian farmers.
But despite last week’s overwhelmingly bearish USDA report, benchmark US wheat and corn future ended the week slightly higher, suggesting that traders had already anticipated many of the changes.
Export demand for Australian wheat is expected to remain solid in the near-term according to Western Australia’s CBH. They singled stronger wheat exports in August and expected this to continue into September.
West Australian farmers appeared to have turned sellers of old crop wheat after the washout in prices over the past eight weeks, which is being reflected in the stronger export pace.
Domestic grain prices continued to soften last week as the premium old crop supplies erode. Stockfeed wheat into the Darling Downs fell by $8 to $230 while sorghum was steady at $210.
New crop wheat bids into the export market remain highly unpalatable at $245 for APW multi-grade into Brisbane.
Premiums for old crop chickpeas have also largely disappeared with new crop harvest in Central Queensland expected to start in a matter of weeks. Chickpeas are currently bid at $830 into CQ ports and Brisbane.
