THE Australian wheat crop has undergone a staggering 98 per cent year-on-year increase based on the current CBH Group forecast.
It is the first good crop Australia has had in the past three seasons and means a massive return to form for the national crop.
CBH wheat trading manager Will Reid said Western Australia had been hurt by the dry finish in late September and early October, so it was slightly below production at about 7.8 million tonnes.
"It's a different story around the country, South Australia has returned to a more average style crop at 4.5mt, while Victoria at the moment is average to above-average with some areas still receiving rain," Mr Reid said.
"New South Wales is the really big swing, we're currently forecasting over 11mt in production and some analysts are saying we might get up to 12mt, which is possible with the wet finish forecast."
Overall, a 29mt crop puts a very different spin on the Australian wheat market for 2021.
The key drivers of global export value is the European Union and Black Sea regions and there have been some very big changes year-on-year in production in those areas.
According to Mr Reid, the EU crop is down at about 18mt year-on-year, which is a massive reduction and Ukraine is down to about 3-4mt.
"Overall there is about a 22mt reduction in production between the EU and the Ukraine," he said.
"The Russian crop is interesting, while it is 9-10mt bigger, the southern areas, which feed the Black Seas ports are significantly smaller than last year, so the large volume of Russian tonnes are further north and will be more difficult to drag to the export markets.
"Overall there has been a big reduction in the Black Sea and the EU, while Australia and Russia have had increases in production which are offsetting those falls in the other regions."
Based on the larger production, Australia should see a return to the traditional milling wheat markets, such as Indonesia, Vietnam, Malaysia, Thailand, Myanmar and South East Asia, which we've been held out of the past couple of years due to smaller crops.
Traditional quality focused markets such as Japan and Korea will continue and the nation should also see a strong return to Middle East markets in line with the South East Asia markets.
"Currently prices in Australian dollar terms are very strong, decile nine, which is quite amazing with a national crop closing in on 30mt," Mr Reid said.
"Australian wheat looks cheap in comparison to Chicago wheat, however Chicago wheat is of increasingly little relevance to the global wheat market and you have to be careful not to get too caught up in it.
"Increasingly we see that Black Sea and EU wheat is the key driver for global value and Australian value, especially in a year when Australia will export large volumes."
A key feature over the global market over the past several seasons, and one which is set to stay in place is the global inverse.
Effectively old crop prices are higher than new crop prices, which means there is a very strong seasonal effect in global wheat values.
Mr Reid said in March, April and May we see a peak in Black Sea and EU values, then we see much cheaper values in the new crop, July and August.
"Over the past several years Australia has been a little bit immune to this effect, however this year where we're strongly competing in the global export market, we will need to maintain close contact with the world market," he said.
"There is a large incentive for Australia to maximise shipping pace from December 2020 through to June 2021 and basically ship out as much of our wheat as we can prior to this global inverse coming into place.
"The global inverse also makes it difficult to profitability carry Australian wheat beyond April or May next year, effectively at that point of the year the market is strongly focused on the new crop northern hemisphere value."