Ann: GrainCorp announces upgrade to FY21 guidance, page-20

The ********* blog is often not very good, with too much emphasis on 'penny dreadfuls' that want to reel us in after we watch a webinair. Not for me!

However it has a long article today re Australian grain prices that while as usual largely repeats forecasts by others - which may, or may not turn out to be accurate - is worth reproducing. Apologies for the length.

(the prospect of a 'record' Ukrainian harvest may be a fly in the ointment for GNC, although claimed reductions elsewhere may more than compensate in a negative way for worldwide grain stocks: time will tell):

(a 'bushel' of what, I think from memory, is about 27 tonnes):

"...Australia’s position in the global wheat market continues to improve.

We pointed out at the weekend how well GrainCorp is placed thanks to the improvement in the size of the Australian crop and the problems elsewhere.

But it’s more than wheat – or so it seems – because Canada, one of the world’s major producers of canola, will now see a slide in output because of the very dry conditions, and European canola (and wheat) is under pressure for the same reason.

A day after the release of the latest global and country estimates for grains from the US Department of Agriculture (USDA) global wheat prices pushed to eight-year highs while European wheat futures also, led by fresh contract highs in Paris...

...In its updated outlook the USDA slashed its forecast of global 2021-22 wheat production and ending stocks, blaming poor weather in Russia, Canada and the United States.

Adverse weather has also cut crop prospects in the European Union, contributing to a potentially “explosive” global supply outlook for the cereals, analyst firm Strategie Grains said on Thursday.

“There are a lot of worries about the French wheat harvest maybe pushing back barley shipments and wheat shipments, so we’ve got Paris wheat probably leading the U.S. markets higher,” said Terry Reilly, senior analyst with Futures International in Chicago, told Reuters.

There’s growing concern across the US that the current very hot conditions have hit at the wrong time for the end of the harvests and plantings of winter wheat and other crops.

The USDA trimmed its estimate for hard red winter production was trimmed 3% to 777 million bushels (mbs) while soft red winter was boosted 1% to 366 mb. White winter wheat production took a bigger hit, down 11% to 176 mb. (Total US winter wheat production was trimmed 3% to 1.32 billion bushels because of the dry weather).

But estimates for spring wheat production was again trimmed – this time by just 1% to 343 mb, but that is down a whopping 41% down from last year, due to prolonged drought in the Northern Plains of the midwest, the prime growing area. Spring wheat yield was pegged at 30.6 bushels per acre, the lowest yield since 2002, if realised.

That is going to start feeding through into higher grain, cereal and break prices in the approaching US autumn and winter.

On the Chicago Board of Trade September wheat closed at $US7.6175 a bushel, after reaching $7.7475, the highest price on a continuous chart of the most-active wheat contract since February 2013. It topped the $US7.7125 hit in April of this year.

As we wrote at the weekend, the driver of the surge was cuts to the estimates of the current Russian and Canadian wheat crops – the USDA cut its outlook for production in Russia, the world’s top exporter to 72.5 million tonnes in 2021, a 12.5 million tonne fall from last month.

The USDA also cut Canadian production by 7.5 million tonnes to 24 million tonnes.

The USDA forecast Australian production at 30 million tonnes for 20-2, more than double the 14.98 million in 19-20 with exports forecast to jump to 23 million tonnes from just 9.14 million tonnes.

Cuts are expected in the size of harvests in other European countries including Turkey, France and Spain because of the worst heat wave and fires in decades. Ukraine is now forecast to produce a record 33.0 million tonnes on increased area and higher yields on harvest results to date.

The USDA said the 1.5 million-tonne rise in Australian production was due to “continued abundant precipitation (which) has benefited crop conditions.”

In other words, unlike most other major growing areas, with the exception of the Ukraine, Australia will be best placed to take advantage of the high prices.

And the same applies to canola which is now only a few months away from harvest. The federal government said in June the area planted to canola is forecast to increase by 25% to almost 3 million hectares, the third highest on record.

“Area planted to canola is expected to be boosted by favourable world prices and excellent planting conditions in Western Australia and New South Wales.

Global canola prices peaked in May of this year at more than $C1,050 a tonne and was trading at $C879 a tonne on Friday, still up 60% from the start of this year.

Canola production is forecast to increase by 4% to 4.2 million tonnes, 22% above the 10-year average to 2020–21,” according to the Australian Bureau of Agricultural and Resource Economics and Sciences."