Rabobank tips steady rise in wheat prices as weather events hit Europe and US
Floods and drought are expected to put a dent in global wheat supply. We look at what’s happening across the world and the impact on prices.
Floods and droughts in the northern hemisphere are expected to dent global wheat supply.
According to Rabobank’s latest Agri Commodity Markets Research report, heavy rain and floods in Europe have delayed the harvest, with a potential fall in wheat protein levels.
In the US, Canada, Russia and Kazakhstan, the converse has occurred, with droughts damaging spring wheat crops, denting yields and causing volatility in prices.
“European winter wheat may have some quality issues, as late rains are associated with a decline in protein content, but they will likely be offset by the large year-on-year production increase for the region,” the bank said.
“Lower quality wheat will also be happily taken to meet local feed demand.”
Rabobank said the US winter wheat harvest was 84 per cent complete, with yields above the five-year average.
But this is in complete contrast to the spring wheat crop, where 99 per cent of it was experiencing drought.
Spring wheat yield losses could be as high as 50 per cent compared to the previous year, according to some estimates.
Last month, the US Department of Agriculture slashed its forecast of US wheat production by four million tonnes to 47.5 million tonnes, but that might decrease further when its World Agricultural Supply and Demand Estimates report is released next week.
At a time when the northern hemisphere grain harvest would force prices downward, Rabobank is forecasting flatter to steadily increasing prices during the next six months.
Its forecast is for Chicago Board of Trade wheat futures to rise from recent prices of $US6.80 a bushel ($A337 a tonne) to about $US7.05/bu ($A350 a tonne) by next June.
Rabobank said Australian wheat growers were the likely beneficiaries from a limited global resupply of northern hemisphere spring wheat in coming months.
“Weather forecasts appear favourable and if severe frosts can be avoided in the months ahead, production may be very good for a second year,” the bank said.
“The lower availability of northern hemisphere spring wheat this season and high shipping costs will likely reinforce Australia’s role as a key origin for Asian wheat demand.”
The Rabobank outlook was shared by National Australia Bank, with senior economist Phin Ziebell saying the supply challenges in some growing regions around the world was keeping global price sentiment strong.
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