It is akin to misplacing a $10 bill, only to find $5 down the back of the sofa.
Australia, having “lost” a stack of wheat from its 2016-17 harvest, looks like it has found some fresh supplies to make up for part of the loss.
Just as investors were puzzling over data showing that Australia’s 2016-17 wheat harvest was not nearly as large has had been billed came a caution that the 2017-18 crop looks like proving notably better than feared.
While a double whammy of dryness and late frost at one point pushed estimates for the latest Australian wheat harvest below 20m tonnes, “evidence is emerging that production is closer to 22m tonnes”, said Nidera Australia, part of the Cofco empire.
Such ideas return some of the wheat that Australia “lost” on Monday, when the Australian Bureau of Statistics on Monday pegged the 2016-17 crop at 30.36m tonnes.
That figure, although still a record high, was more than 4.6m tonnes below the estimate from official commodities bureau Abares.
‘Harvest has exceeded our expectations’
Nidera said that its more sanguine assessment of the latest harvest reflected data on crop deliveries.
“Looking across Australia, receival data from some of the larger bulk handling facilities indicates to us that it’s allaying previous concerns of a sub-20m tonne Australian wheat crop,” the merchant said.
While data from South Australia-based crop handler Viterra, for instance, showed grain deliveries down 28% at 5.39m tonnes as of the start of 2018, that was more than might be expected, given Abares forecasts of 45% declines in the state’s production of both its major cereals, barley and wheat.
In Western Australia, CBH Group, which handles the vast majority of the state’s harvest, last month raised by 500,000 tonnes to 13.2m tonnes its estimate of the overall 2017-18 harvest.
“It’s fair to say that this year’s harvest has exceeded our expectations, particularly in the southern part of the state,” said the co-operative, which had initially forecast the crop at 9.5m-10, tonnes.
Nidera said that West Australia looked like ending up with a wheat production number “pushing 8m tonnes”, compared with an Abares estimate last month of 7.52m tonnes.
“South Australia has held close to its 4m tonnes,” above the 3.65m tonnes expected by Abares, “while its Victorian neighbour looks to push over 4m tonnes”, compared with an Abares figure of 3.55m tonnes.
“In Western Australia, South Australia and Victoria, improved final production numbers versus forecasts have been more notable where late rainfall and finishing conditions have offset the production shortfalls seen in New South Wales and Queensland.”
However, the extra supplies present a setback to investors hoping for further recovery in Australian wheat prices, which for January have risen by 2.6% to Aus$261.00 a tonne on the ASX futures market, for east coast delivery.
“At current relative values verse other origins, it is unlikely that we can expect any significant price improvement” for Australian wheat, Nidera said.
“At this point in the pricing season, it is hard to see a significant uptick in demand for Australian wheat.”
The merchant estimated that Black Sea and Argentine wheat was currently around priced some Aus$25-30 a tonne cheaper than Australian standard white wheat and premium white wheat in key Asian markets.
ABS vs Abares
The Australian Bureau of Statistics, releasing its relatively low estimate for Australia’s 2016-17, reported area at 11.72m hectares.
Abares reported area at 12.44m hectares.
Both organisations are in line on estimate for the 2015-16 harvest, at some 22.3m tonnes.