THE rally in wheat prices held last week.
While we did not post new highs, the close last Friday night was the second highest close for the rally.
Early last week the bubble seemed to burst when the United States attaché in Australia lifted our production estimate to 27 million tonne.
This is a little above the Australian Bureau of Agricultural and Resource Economics and Sciences current estimate, and 1mt above the current official United States Department of Agriculture estimate being used in their global balance sheets.
However, we continue to see a raft of forecasting agencies reducing production estimates from a lot of countries still and primarily focussing on key exporting regions such as the European Union, Black Sea and the United States.
The International Grains Council was the latest agency to reduce global estimates last week.
As well, Egypt paid a higher price for Russian wheat in its latest tender and China is reportedly releasing grain stocks, including wheat, to cover feed demand.
Severe flooding in China may lift its requirement to import corn.
One area that the market continues to focus on is Russia, where variable yields from its winter wheat harvest are still coming in below expectation overall.
Hot and dry conditions in some spring wheat areas continue to keep the focus on Russian production estimates.
We are also seeing interest in the prospects for spring wheat crops in the US, Canada and Europe to see if they will be good enough to cover for Russian issues and, in fact, help claw back ground lost from winter crops.
Here in Australia the mood seems to be optimistic about this season.
With drought areas in New South Wales now showing average to above average rainfall for the past nine months, it is being assumed that the country as a whole is having a good season, and that production will bounce back sharply.
Victoria is also showing good rainfall over the past nine months and had a much better season last year as well.
However, Queensland, South Australia and Western Australia are not enjoying the same good seasonal conditions.
Parts of South Australia are on track to have one of their driest July's on record.
In WA there are only some areas that have enjoyed good July rainfall to date.
In terms of the April to July winter growing season, the Central West of NSW is doing well, and a lot of the rest of NSW, Victoria and eastern South Australia are within 80 per cent or better of average rainfall.
The rest of the cropping belt is in a rainfall deficiency, and without a significant change to the season, Australian production prospects will not be held up by NSW and Victoria on their own.
- More information: Malcolm Bartholomaeus on 0411 430 609 or firstname.lastname@example.org