Global grain market update
AS HARVEST of the drought-ravaged winter crop gains momentum here in Australia, European farmers are also very busy, juggling their summer crop harvest program with the seeding of winter cereals, oilseeds and pulses.
The European summer was warmer and significantly drier than normal, and these unseasonal weather conditions have continued into the autumn. While this is the ideal scenario for the summer crop harvest, it is seriously hindering the planting and emergence of the winter crops in affected areas.
The driest regions stretch from northern France, through Belgium, northern Germany and into the drought declared areas of eastern Poland and the northern Czech Republic.
Further south, most of the Balkan countries, especially Romania, are also extremely dry. The seeding program is lagging behind the five-year average in all of these regions.
At the moment the rapeseed crop has been the most affected, decreasing the area sown and compromising emergence. The optimal sowing window is August through to mid-September in most of Europe and good early development before the winter sets in is critical for good yields.
Forecasts suggest that the European Union rapeseed area could be down as much as 8 per cent compared to last season.
The planting window for cereals is still open and the program is ongoing. The area planted to wheat is forecast to be more than last year due to the higher price relative to alternatives. Add the swing from rapeseed and the program is significant. However, there is already talk of resowing in isolated pockets, due to extremely poor emergence.
Substantial rainfall is still required in many regions to ensure that the potential area is actually planted. The risk here is that temperatures start to drop, and it becomes very difficult to get into fields before the winter sets in, leaving some European countries well short of their intended crop area. It is far too early to be ringing any alarm bells but the potential impact on European production, global cereal supply and international grain prices is weighty.
Russia surprised the market by increasing its total 2018 grain production forecast to 109mmt. This is up from 106mmt last month after favourable weather in Siberia led to a better than expected wheat harvest in the east of the country.
The higher production number leaves 38–39mmt of total grains available for export this season.
Making news here in Australia over the past week was the 420kmt added to the shipping stem in Western Australia.
This is the largest weekly increase since May this year but quite small relative to a more normal season. Some cargoes may be destined for the east coast but some are undoubtedly going international. This confirms that Australian exporters are seeing demand at current FOB values and are competitive against Black Sea offers.
Asian demand and the expected slowdown in Black Sea offers should ensure that Australia continues to pick up the required demand for an export wheat and barley program that will be the lowest in many years and could easily be under 8mmt and 3mmt respectively.
OVERSEAS MARKETS: Grain Brokers Australia’s Peter McMeekin said the demand for Aussie wheat and barley in Asia could be under 8mmt.