By Andrew Whitelaw | Source: CME, Mecardo, StatsCan, FAO
Overnight there were some production estimate revisions by stats Canada and the FAO. In this week’s market comment we look at pricing both locally and globally.
Overnight Statistics Canada released data showing that 2018 wheat and barley production was up on the previous year. In 2018 wheat production was increased by 6%, and barley 6.2%. However, the Food and Agriculture Organization (FAO) released their cereal supply and demand brief.
The FAO estimate that global wheat production in 2018 will be back 35.2mmt to 725.1mmt. This reduction in production is leading to end stocks being 12.2mmt behind the end of last season – albeit to 2nd highest level since in history.
Chicago futures have dropped 2% overnight as the December contract approaches its finalization (figure 1). The world crop is largely complete for 2018, with any changes to production being small amendments to estimates.
In the next two months, we will see if Russia is able to continue its pace of exports, overnight they won the Egyptian tender with the US unable to compete. There is a strong possibility that Russian supplies will be exhausted, and curbs could potentially be introduced, which would result in volume moving back to the US.
At a local level, basis levels have improved week on week (figure 2). Although basis levels have retreated from recent highs, they are still at historically high levels. The question remains as to how long these basis levels will be sustained, and what impact increased grower selling will have on prices. The reality however is that prices are likely to be maintained at strong levels.
The USDA release their WASDE report next week. It is however unlikely to have a major impact on pricing as the bulk of world production is a known entity.
There is more rainfall predicted across the east coast, this will assist the summer crop in the north but will unfortunately cause more delays to harvesting in Victoria.
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