According to estimates from the US and Australian Governments, our wheat industry has a very good chance of resuming its key role as a major world wheat exporter because of better weather than a year ago.
The news, and talk of higher production in Canada, China, India and several smaller producers, means the surge in wheat prices is well and truly over for the time being.
That will be good news for consumers, but not so good for wheat farmers here and in other countries who facing higher fuel and fertiliser costs.
World wheat prices peaked at $US13.495 a bushell on the Chicago Board of Trade earlier in the year, on Tuesday it was trading around $US7.30 a bushell and looking weak.
It’s the old story; helped by some good weather (except in parts of the US where heat stress is now an issue, after the rains and floods of the past couple of months).
Drought and high prices for corn sees farmers (especially in the US) cut plantings of wheat or lose production because of poor yields.
Prices rise, farmers across the world plant more wheat crops this season. Good weather happens, yields rise, harvest rise (this crop year globally it will be a record, according to estimates) and prices fall.
But farmers have also been hit by rising fuel and fertiliser prices, while wheat prices have now fallen.
China and India have harvested bigger crops this year, according to recent government figures.
China has surmounted snow and ice-storms, floods and earthquakes and the country’s total wheat output is expected to rise 2% or more to 112.5 million tonnes in 2008.
That will help push down food prices, which were behind the recent sharp fall in consumer inflation to an annual rate of 4.9% in August from 8.7% in February.
In India, the monsoon finally surged last month (and produced terrible floods in Bihar State), but provided enough moisture to boost grain harvests in the coming year.
Indian Government figures suggest a record 78.4m tonnes of wheat were produced in the year ended June, up 3.4% compared with last year.
In Australia confidence is high that we will have the best harvest in three years, but we need more rain in parts of the vital NSW and northern Victorian growing areas for a solid figure to be achieved.
Despite a dry winter in some grain growing parts of the country, especially NSW, the news is still good for the important winter crop harvests now starting in some parts of the country.
ABARE (the Australian Bureau of Agricultural And Resource Economics) said yesterday that rains early this month seem to have come in time for many of the those areas that were dry in winter, but good follow up rains will be needed to boost yields and soil moisture levels.
"With the exception of Queensland, the majority of Australia’s winter cropping regions received average to below average winter rainfall, with August being a particularly dry month. The lack of winter rainfall meant crops in many areas were suffering moisture stress as they headed into the critical spring growth phase, " ABARE said in its latest crops report.
"Widespread rainfall in the first week of September arrived just in time for many crops. However, because of a lack of subsoil moisture in many areas, further spring rainfall will be critical to secure forecast production levels."
The report confirmed that the size of the most important crop of all, wheat, will be around 10% down on first forecasts of around 25 million to 26 million tonnes and a bit under an update in June, at the start of winter.
“Of the major winter grains, wheat production is forecast to be 22.5 million tonnes in 2008-09, around 5 per cent below the June 2008 forecast of 23.7 million tonnes, but well above the 13 million tonnes harvested last year”
Overall, Australia’s winter grains production is forecast to be around 35 million tonnes in 2008-09, close to 13 million tonnes more than the drought affected 2007-08 harvest and less than 10 million tonnes the year before.
The latest forecast matches the estimate given in last week’s monthly global update from the United States Department of Agriculture. The USDA said that despite the lower forecast from Australia, and from Argentina, global wheat harvests would hit a record.
The USDA increased its estimate of global production to a record 676.3 million tonnes, up from last month’s forecast of 670.8 million tonnes.
Canadian farmers will harvest 25.4 million tonnes, up slightly from the August forecast of 25 million tonnes; European Union output will be 147.2 million tonnes, up from 143.2 million tonnes in the August forecast and these will offset declines in Australia and Argentina: Australia will produce 22 million tonnes, down from the 25 million tonnes in the August forecast and Argentina growers may harvest 12.5 million tonnes, 1 million tonnes down on the August estimate.
According to the USDA’s forecast, the US is expected to be the largest exporter of wheat, followed by Canada, Russia, Australia, Ukraine and Argentina.
ABARE said that the "latest winter crop forecast represents a slight downward revision on the 37 million tonnes forecast released by ABARE in June 2008."
"The total area sown to winter crops in 2008- 09 is estimated to have increased by 7% to slightly less than 22 million hectares," it said in the crop report.
Barley and canola production are also forecast to increase in 2008-09 to 7.8 million tonnes and 1.6 million tonnes, respectively.
ABARE said that although the barley crop is up significantly from the 2007-08 production level, "it is below initial estimates. Canola production at 1.6 million tonnes will be 55% higher than last season. The area sown to canola is estimated to have increased by 15% in 2008-09, reflecting the good start to the season in
