Australian Drought is Hurting Wheat Seeding

Weather conditions also a concern for Argentine crop.

After a couple years of drought resulted in poor wheat harvests, Australia was expected to rebound this year, but dry weather during the planting season is causing some worry.

"There's been some good and some bad in Australia," says Farm Progress market analyst Arlan Suderman. "They are pretty much wrapping up their opportunity to get the wheat crop in the ground and some areas are still left pretty dry."

There have been some recent rains to improve moisture in Victoria and New South Wales and more is expected this week, but other areas in South Australia and Western Australia are extremely dry.

"Overall I'd say that the majority of the crop has sufficient moisture to germinate and for early establishment," Suderman says. "South Australia and central portions of Western Australia are still lacking that moisture for good germination and therefore will probably see some acreage pullback."

On Friday in the supply and demand report USDA did increase their production estimate for Australia by roughly 37 million bushels because of increased acreage. Suderman says that could change in the August report if some of those acres were not able to get planted that were intended and dry conditions continue.

"More than 50% of the crop is established," says Suderman. "The portion that is still under stress is a minority but it is enough of the crop that it has to be taken seriously when overall global stocks are tight."

Stocks have been at extremely low levels for sometime now and a rebound of the Australian crop from the past two years is very important to world stocks and Suderman says these dry conditions may make a rebound difficult but not impossible.

"Which is one reason why we are not seeing prices rally sharply at this point," Suderman says. "Instead we are seeing prices stabilizing at levels higher than many in the trade expected."

While Australia is getting a lot of the press, Argentina is in equally dire straits right now. Suderman says they may have a week or two longer to try to plant the crop, but it's a very similar situation to Australia; perhaps a bit worse following Friday's USDA Supply and Demand Report.

"Hard red spring wheat production came in below expectations," Suderman says. "It's quality milling wheat that is the tightest in the global market and hard red spring wheat coming in roughly a million metric tons below expectations means that it's just that much more important that we see production in Australia and Argentina come through this year."

TAGS: USDA
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