Global wheat markets may be on the verge of the first major bull run in five years as crop expectations tumble in several major exporting countries.
The widely-watched United States Department of Agriculture slashed its estimate for world wheat production by 8.4 million tonnes in its July supply and demand update with most of the reduction occurring in major exporting countries. The USDA is now projecting that world wheat output will slide by more than 21mt to around 736mt which would be the smallest in three years. Some forecasts are already saying further reductions are likely.
Most of the decline comes a sharp drop in Russian wheat production where hot, dry weather has resulted in significantly lower than expected yields.
USDA slashed its forecast for Russia’s wheat crop by a further 1.5mt to 67mt. The latest forecast is 18mt or 21 per cent below last year’s record large 85mt Russian wheat harvest.
Russia has harvested about a fifth of its winter wheat crop with early yields down by around 20pc from last year’s levels. Spring wheat production in Russia is also expected to be well down on last year’s levels.
Production in Ukraine, the other major Black Sea wheat exporter was also trimmed. USDA lowered its production estimate for Ukraine wheat production by 1mt to 25.5mt, down from last year’s 27mt.
European wheat production estimates were also lower. USDA reduced its forecast for the European Union wheat production by 4.4mt to 145mt, down 6.6mt from last year. Production estimates in Germany, Poland and Romania have suffered following a hot, dry finish to the growing season.
USDA was also forced to cut its forecast for Australia’s 2018/19 wheat production as they accounted for the continued drought conditions through much of Queensland and NSW. Australia’s wheat production estimate was reduced by 2mt to 22mt.
Private forecasters are saying the USDA’s estimates will prove optimistic in the absence of a soft spring to compensate for late sown crops. Some farmers through parts of south western Queensland and central NSW have only completed planting the last of their wheat crops in the past week and the outlook for these crops will hinge on rain in the coming weeks and a cool, damp spring.
US wheat futures finished last week solidly lower despite the bullish global supply and demand outlook offered by the USDA. Markets were sold sharply lower in the early part of last week on a further escalation in the US/China trade war and pegged back part of these losses towards the end of the week.
Local markets remained subdued last week. Buyers appears to be more comfortable following significant purchases of interstate shipments of wheat and barley that will be unloaded in Brisbane in the coming weeks.
