The Northern Hemisphere production hiccups continue

By Angus Groves

It seems the age-old saying, ‘one man’s misfortune is another man’s opportunity’ is playing out in Australia this season. The Northern Hemisphere has experienced a record-breaking summer, from drought and severe heat in the Northern US and Canada, to catastrophic flooding through parts of Europe.

We certainly don’t wish these conditions on anyone, and our hearts truly go out to our friends in the Northern Hemisphere. However, it must be said that with their reduced production forecasts, and the ever-improving conditions here in Australia, it appears it could be a catalyst for a huge windfall for Aussie farmers not long after we battled three years of crippling drought ourselves.

These persistent drought conditions across North America are of course the reason Australia high-protein wheat and canola prices continue to climb week-after-week. And in more recent weeks the chatter surrounding Russian production might also benefit us here in Australia, providing another possible leg up over our Northern Hemisphere counterparts.

Although nothing has been confirmed, with the US Department of Agriculture expected to update the market next Thursday, many analysts are expecting the Russian crop to come in well below 80 million tonnes, which is a far cry from the 85 million tonnes the USDA had in their last official update.

The primary reason for the reduction was an update last week from Russia’s statistical agency, Rosstat, regarding the winter wheat area, which, despite their mild winter was reduced to 15.6 million hectares primarily due to winterkill events earlier in the season.

If we turn our attention back home, we see the Australian crop continue to improve in the last fortnight. Finally, in NSW we have persistent sunshine, or at the very least for some regions, the disappearance of weekly rain events. This change in weather pattern has allowed crops to start growing again, with abundant soil moisture and plant populations all on target, sunshine was the only ingredient missing for many NSW farmers.

Once the ground has dried out (which should be this week for most), farmers will get to work spraying crops with herbicides and fungicides before full row closure, and top-dressing areas that have been far too wet to this point. If we can achieve this mammoth task before the next rainfall this would put Australia, and in particular NSW, in the box-seat for back-to-back huge crops.

Most farmers would have made some forward sales on canola with the high prices to date, but wheat and barley have remained as the proverbial poor cousin, with lack of forward commitments until the last fortnight.

Cash prices have consistently held above the $320 Newcastle port equivalent, and it seems many are happy to start selling at these levels while the sunshine beams down on their ever-impressive crops out the window.

The question we must now ask is, will the Russian production hiccups provide us with another leg up prior to harvest, or have these already been priced in? We will certainly find out when the USDA releases their update next week. Stay tuned.