"Uncertainty" seems to be the word that best describes the current global wheat market, with almost every market report using the word "uncertain" to describe conditions.
Global wheat prices have slipped 14 per cent month-on-month to finish August about the 570US cents/bushel mark.
With drier conditions around the globe, forecasts for grain production change every month.
In the latest World Agricultural Supply and Demand Estimates report, the United States Department of Agriculture (USDA) predicted global wheat exports in marketing year (MY) 2023-24 at 209.4 million tonne, down 9mt from the previous marketing year.
The Canadian drought is getting worse.
While bad news for Canadians, this could be an upwards pressure and support global grain prices.
In August, Statistics Canada reported that farmers planted the country's widest wheat area since 1997 at 10.7 million hectares for MY 2023-24, up 6.7 per cent from 2022.
However, despite this increase in planting area, the country is set to produce 2pc less than last year.
Forecasts continue to drop Canada's expected output - with Agriculture and Agri-Food Canada (AAFC) dropping its August forecast by 1.9mt.
StatCan foresee wheat production down 14.2pc year-on-year (to 29.5mt), despite higher area, due to dryness over the prairies that will likely limit yield potential.
"For 2023-24, the most significant agricultural risk is climate-related as severe drought continues across Western Canada, with the most impact felt in Southern Alberta and Western Saskatchewan," the AAFC report said.
"Significant uncertainty remains at this time regarding estimates of crop yield and production."
Quality concerns in the northern hemisphere are fueling worries that there may be a shortage of milling wheat.
Rabobank said while the harvest volumes look OK, there are issues in both the EU and China with grain quality.
Germany and France have battled persistent rains for much of the harvest period, which led the EU to trim its estimate for soft wheat yields to 5.78t/ha and warn of milling quality production losses.
Because of this, availability of northern hemisphere milling wheat will probably be lacking and more feed wheat will be around in 2023/24.
"Because of this, we anticipate wheat to gain competitiveness in the feed ration in 2H 2023," Rabobank said.
Due to the quality issues in China, Rabobank said it is also a possibility that Australia could see higher Chinese import demand for high-quality wheat this season.
Markets have become more comfortable with the Russian-Ukraine war, shown by their relatively small reaction to the removal of the Black Sea Grain Agreement (BSGA) (compared to the beginning of the war).
"A continuation of decent Russian and Ukrainian exports in August certainly helped to alleviate some supply-side fears following the cancellation of the Black Sea Grain Initiative last month," a Rabobank report said.
Russian exports in the first 24 days of August were 64pc above last year's levels year-on-year.
The USDA estimates that Russia will produce about 85mt of grain this season, however Rabobank said private estimates suggest an even higher production level.
Ukrainian production has also increased.
The USDA has predicted 21mt for the country in August, raising its estimate by 3.5mt.
"The question, of course, is: to what extent can this wheat actually be exported given the obvious logistical hurdles created by the cancellation of the BSGA and the constant threat of further attacks targeting the Danube River port and rail infrastructure," Rabobank said.
As for Argentina, a strong recovery in production is expected, as moisture levels look good at the moment, but private estimates remain mixed.
While Western Australia is experiencing mixed conditions, Australia-wide the industry is forecasted to produce average levels of grain this season.
Rabobank's preliminary forecast expects Australia to produce about 26mt, which is a 2mt decrease from the five year average.
Rainfall has been at good levels in southern New South Wales, as well as across most of Victoria and South Australia.
Northern New South Wales and southern Queensland have been experiencing drier conditions, as have the northern areas of Western Australia.
ANZ has flagged that one by-product of drier conditions could be grain rationing - either to wait for better prices, or for mixed-farming operations, to have feed in reserve for livestock operations.
Despite this, ANZ said in their recent Commodities Insights report that global exports remain strong.
The removal of the Chinese barley tariff is promising for Australian producers, however ANZ believed the industry will react cautiously to resuming exports to China.
Australian growers will hopefully seek to avoid reverting back to an over-reliance on a singular market.
"The move is beneficial for malting barley, which has been highly sought by Chinese brewers, while also providing a boost for feed barley exporters," the report said.
ANZ predicts that the ongoing global demand for grain will continue to remain strong and trend upwards over time.
The ANZ report said there is still an "enormous degree" of growth potential in the industry.
"Literally billions of customers across developing and middle-income markets - particularly in key Asian markets - continue to gradually improve their standards of living," the report said.
As these customers improve their standard of living, they will begin to seek more variety and volumes of food - which will unlock millions of dollars in the grains market.
"For many, this will see a growth in grain-based foods, including noodles and breads, in addition to strong growth in consumption of meat and dairy products," ANZ said.
Post COVID-19, many countries are beginning to increase their domestic production to ease food security concerns.
This has resulted in an increase for feed and overall grains demand.
Similarly, some countries have decided to increase their grain reserves for emergencies, which has also increased global grain demand.
"As such, even in a period where global crop production levels are strong, demand levels are likely to remain strong," the report said.
Given this strong demand outlook, grain producers are likely to see continued upward growth.
This has also been supported by continued large investment in agriculture by both corporate and government in the past five years particularly.
More Australian farmers are choosing to grow grain, rather than livestock, as the grains industry continues to look more attractive.
ANZ believes there are a few reasons for this, ranging from labour costs and commodity pricing.
Since 1970, cropping area in Australia has increased by 150pc from just over 10 million hectares to around 24.7mha in the 2023/24 season.
It is slightly down from its peak in 2021/22 of 25.7mha.
In comparison, Australian cattle prices have fallen by about 40pc over the past year, particularly as the post-drought restocking surge has finished.
On a year-on-year basis, the benchmark Eastern Young Cattle Indicator has now fallen by about 40pc.
Cropping requires lower labour levels and costs when compared to livestock, especially outside of seeding and harvest.
It is also easier to achieve economies of scale than in livestock operations.
ANZ said it could be argued that in comparison to other major agricultural sectors, the growth in technology has benefited cropping efficiency more than livestock.
This includes harvester developments to input and fertiliser application.
These will help the sector adapt more readily to changing climate demands, restrictions and sustainability.
"It could also be argued that as cropping enterprises, particularly large-scale ones, increasingly diversify the variety of the grains, oilseeds and pulses they plant, they have a relative flexibility to adapt to changing market demands, trading conditions, and commodity price fluctuations," it said.
ANZ believes the steady export demand for grains is likely to mean less volatility in prices and more predictable forward planning.
"Without question, the potential still exists for price volatility in grains and oilseeds, particularly driven by events such as trade disruption through conflict, or potential shortages through weather events," it said.
"That said, this volatility is more likely to see prices on the upside, rather than the downside due to oversupply."
They emphasised that they believed every part of the Australian agri-landscape had a great future ahead of them, particularly in a global environment that is focused on food security.
Sign up for our newsletter to stay up to date.