Southern Hemisphere pressures wheat market
Increased wheat production in Argentina and Australia has added 9.15 million tonnes to global export availability, pressuring wheat prices. Despite Russia’s reduced export potential and higher duties, U.S. wheat futures declined due to Southern Hemisphere supply growth. Argentina’s harvest is exceeding expectations, with estimates rising to 19 million tonnes, while Australia’s output is pegged at 31.9 million tonnes.
Increased wheat production in Argentina and Australia is expected to make 9.15 million more tonnes available for export
The wheat market continues to struggle, despite some positive news from the Black Sea region.
Russia has announced a large drop in its wheat export potential by reducing the February through June export limit to 11 million tonnes. This is down 18 million tonnes from last year during the same period.
The Russian government also increased export duties by 18 per cent, which will take effect Dec. 4.
The increase in export duties and reduced export limit should have caused a rally in the wheat market, but U.S. futures closed down by 10 to 17 cents per bushel during the last week of November
Why didn’t the wheat market rally? It is most likely due to the improvement of prospects in the Southern Hemisphere.
In Argentina, the Rosario grains exchange dropped its estimate of wheat production in the middle of November to 18.8 million tonnes, down from 19.5 million tonnes in October. The harvest is advancing rapidly in Argentina with close to half of the wheat in the bin (actually the bag) in the key core growing regions.
The harvest was delayed by rain in late November, but yield results are coming in above expectations. The USDA currently forecasts the wheat crop in Argentina at 17.5 million tonnes.
Given the current harvest results for Argentina, the U.S. Department of Agriculture will likely be forced to raise production closer to 19 million tonnes. That would be a 3.15 million tonnes increase in production in Argentina from last year.
Argentina is already ramping up wheat exports for the 2024-25 crop year with 540,000 tonnes shipped during November. This is nearly four times the export total that occurred during November 2023.
Australia released its latest crop report, and wheat production was also increased by 100,000 tonnes to 31.9 million tonnes. Wheat production in Australia is pegged to be the fourth largest crop in history.
The harvest in Australia is well underway but also has been delayed by rain in the southeastern growing regions. There may be some quality losses from these rains, but yields are unlikely to be impacted by the precipitation.
The USDA estimates Australian production at 32 million tonnes, which is very close to the ABARES estimate. The year-on-year increase in Australia is close to six million tonnes. Australia is also shipping its new crop wheat at a good pace this year.
The increased production in Argentina and Australia amounts to 9.15 million tonnes that will be available for export during the current crop year. This factor, along with fund selling, have been the primary drivers of the decline in wheat prices during the past month. Don’t expect wheat prices to rebound until the harvest pressure from the Southern Hemisphere subsides.
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Source : The Western Producer
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