South eastern Australian grain prices have rocketed higher in September as private forecasters slash production estimates with many farmers making the call to cut crops for hay.
ASX east coast wheat futures for a January delivery, the benchmark for the new season's APW price, has risen $20 to $353 a tonne since late August. The contract is nearing contract highs of $360/t set in late May.
Southern Queensland grain prices remain firm. Wheat is holding at $405/t while new crop barley was steady at $375 delivered to Darling Downs feedlots.
Wheat harvest is under way in central Queensland while farmers in southern Queensland are cutting cereal crops for hay and silage rather than seeing them through to harvest. CQ wheat is fetching $360/t on-farm, which is landing into Downs feedlots at $415 to $420.
Australia's ABARES will release its September crop production estimates this week. Some private forecasters are tipping the national wheat crop will be trimmed to around 19 million tonnes down from 21.1mt in June. Crop estimates will continue to decline in the coming weeks in the absence of finishing rains in south eastern Australia, SA and WA.
Australia's prolonged drought is severely impacting wheat production and limiting our capacity to service long-term wheat markets.
National wheat exports have tumbled since the east coast drought started which is now into its third year for large areas of Queensland and NSW. Australia exported an average of 18.5mt of wheat in the five years prior to 2017 when the drought started. National wheat exports are expected to fall below 9mt in the 2018/19 marketing year. Another poor east coast crop means the small exports will continue for at least another season.
Some analysts are now saying the current Australian drought is contributing to a significant shift in global wheat trade. Some Asian wheat importers are starting to boost imports from other countries as Australian supplies become harder to access and prices soar.
The United States is reporting stronger wheat export sales into several important south east Asian destinations for the 2019/20 marketing year, which started in July, notably, the Philippines, Indonesia, Vietnam and Malaysia.
Australia exported 737,000 tonnes of wheat in July, according to recently released monthly trade data. Accumulative October to July Australian wheat exports are just 7.5mt with only two months remaining in the 2018/19 marketing year.
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