DESPITE a reduction in Australian production, world wheat supplies for 2018-19 have increased by 800,000 tonnes, according to the latest US Department of Agriculture world supply report.
A bumper Canadian crop and additional Russian carry-over stocks have levelled out the gap in grain production as Australian production suffers the effects of drought.
Australia’s wheat exports were lowered by one million tonnes to 10.5 million tonnes, as export prices were expected to remain uncompetitive and domestic grain supplies likely to be consumed as feed, the report said.
In comparison, Australian wheat exports in 2017-18 reached 14 million tonnes.
The report also scaled back total Australian grain production by 500,000 tonnes to 17 million tonnes for 2018-19.
Rabobank senior grains and oilseeds analyst Cheryl Kalisch Gordon said the US Department of Agriculture’s report was finally catching up with global market views of Australian production.
“It’s a pretty neutral outlook. In the southern hemisphere crops are pretty much in the bag, we know where we’re at, including with Argentina set for record wheat production,” Dr Kalisch Gordon said.
“In terms of the northern hemisphere, there’s been planting of crops but they haven’t entered the risk period of the cold snaps.”
Dr Kalisch Gordon said global wheat supply remained tight for the season.
“Much of what we’re seeing in this report, including looking at US wheat for 2018-19 being forecast up 8 per cent on last year, that’s something at Rabobank we’ve already factored into our forecast for next year.
“The second half of next year we will see prices drop below the $500 mark, because there will be more northern hemisphere supply on board.”
A Rabobank commodity report published last week said Australian grain output and exports for 2018-19 were expected to be cut further.
Commonwealth Bank market analyst Tobin Gorey said the US would benefit from reduced world wheat supply.
“Russia’s front-loaded exports seem to be exhausted,” Mr Gorey said.
“The EU seemingly feels no urgency to cut prices to be competitive. And nor does Australia. The US remains an export window.”