Global wheat supply has tightened, driving wheat values to their highest levels since 2008 in a number of markets. We see this in our own market as the Chicago Board of Trade Futures $ A-value continues to trade in a range that it has seen since the massive price surge in early 2008.
This is also reflected in our spot market for both new and old season wheat, with prices rising above $ 350 per tonne and close to $ 380 / tonne in WA for the new season. Price levels like this are traditionally reserved for drought years, with our market reacting to national problems and not to international price levels.
The various futures markets around the world will continue to rebound as the final crop results from the northern hemisphere are interspersed. Markets will also be watching the Australian crop to see how big it can get and whether it will offset some of the ongoing downgrades being put forward for Russian, European and Canadian crops.
The Australian crop had a setback in August with below-average rainfall across the country, but September got off to a good start in many counties of NSW and Victoria.
The U.S. Department of Agriculture’s monthly report this week will provide further insight into the current global balance sheet, but uncertainty will continue as the estimates for the various crops around the world finalize.
We also need to consider demand as high prices are likely to curb some consumption. Additionally, economic problems due to the impact of the COVID-19 pandemic will have some impact on wheat demand as the impact on consumer markets and demand for meat, as well as demand for biofuels made from grains in general, will spread.
From here, however, another factor will come into play and that is the planting of the 2021/22 winter wheat crop in the US, Europe and the Black Sea.
With wheat prices strong, we would expect acreage to remain stable, but the market will be mindful of soil moisture and the pace of planting.
There are already some concerns about soil moisture in the US Southern Plains. At this stage only about 11 percent of Kansas is declared a drought, but this is already considered sufficient to potentially delay planting.
Most of the years these parts of the United States have experienced some drought. However, if the global supply is already under pressure, the market will be sensitive to the next new harvest until it is convinced that supplies will be replenished.
Concerns about the establishment of the next winter wheat crop should prop up wheat prices for the next eight to ten weeks. During our summer there could be concerns about snow cover and frost damage.
The Story Tight Wheat Supplies are boosting stats for the first time on Farm Online.