The Australian Bureau of Agricultural and Resource Economics (ABARE) predicted that Australian wheat production will be 372 million bushels. In October, the USDA predicted Australian wheat production will be 478 million bushels.
Both projections are below last year's 882 million bushels and the 5-year average of 833 million bushels.
There is speculation Australia may import wheat from North America. The report did not specify if the imports would be from the United States or Canada. Below-average Canadian wheat production increases the odds that the imports would be from the U.S.
Australia's feed grain production is also predicted to be below average. Thus, low quality wheat is being substituted for corn in feed. The Australian Quarantine and Inspection Service reported that requests for importing sorghum, corn, wheat, barley and rye have been received.
The report indicated that 9.8 million bushels of sorghum imports have been approved.
Increased Argentine corn production expectations may be hurting U.S. corn prices. Some analysts are predicting Argentine corn production to be 531 million bushels. This is about 36 million bushels higher than USDA's October estimate but still lower than 2001/02 production.
The facts are that current Argentine and Australian wheat and corn production have been factored into current wheat prices. Deviations from these expectations will cause changes in U.S. wheat prices.
On other foreign fronts, SovEcon Ltd. projects that Russian wheat exports will reach 360 million bushels. Both the USDA and the International Grains Council have Russian exports at about 200 million bushels compared to 161 million bushels last year.
Russia's main customers in order of amount of wheat sold and shipped are Italy, Egypt, Algeria, Greece, Morocco and Israel. Last year Russia exported 94.6 million bushels to these countries. To date, Russia has sold 67.9 million bushels. These six countries are all important U.S. wheat customers.
Canada's wheat production is projected to be 570 million bushels compared to a five-year average of 901 million bushels. Exports are expected to decline from the five-year average of 650 million bushels to 331 million bushels.
In the United States., corn prices have been trending lower. Low corn prices relative to wheat prices have a negative impact on wheat prices. Lower prices are the results of increased foreign coarse grain production and increased export competition.
Some U.S. feed mills have reported micro toxin (fumonisin and aflatoxin) problems with corn. The problem has been reported mostly with dryland corn. Depending on the degree of the problem, corn prices may reverse the current downtrend.
Lower amounts of corn available for feed would cause corn prices to increase and possibly move more wheat into the feed chain.
Worldwide economic development has resulted in a world market for agricultural commodities. With an increased number of suppliers, competition has increased. Eastern European and former Soviet Union countries are now exporters rather than buyers.
The European Union has been a net importer of wheat for the last two years rather than a net exporter.
Argentina and Australian wheat and feed grain production will impact U.S. wheat and corn prices. The impact will not be known until the Argentine and Australian production is known.
Starting in late November, the Kansas City Board of Trade March wheat contract is the one to watch. Critical price levels are $4.25, $4.50 and $4.75. If the contract price is below $4.50, then the next support level is $4.25. Prices below $4.25 spell trouble.
Wheat prices are expected to remain near current levels until the Argentine and Australian wheat harvest are known. Without surprises, wheat prices are expected to be steady to lower.
Dr. Anderson is an economist at Oklahoma State University in Stillwater. Readers may call 405-744-6082, or e-mail [email protected].