The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) has shaved 680,000 tonnes from its expectations for the country’s 2019/20 wheat harvest.

ABARES says that "substantial rainfall from late January through to mid-February generally arrived too late for additional planting of summer crops."

The total expected harvest for the current season is now puts at 15.17m tonnes, against its forecast from last December of 15.85m tonnes. How bad is this for the global outlook?

Disappointing but not devastating

If this scenario proves correct, this will be Australia’s lowest wheat harvest since the 2007/08 season, when wet weather (as opposed to this year’s dryness) was the problem. Back then the total Australian wheat harvest was 13.6m tonnes.

Australia is one of the world’s top 10 wheat exporters.

The recent bushfires have primarily affected wheat (and other agricultural output) in the states of New South Wales and Queensland in the east of the country. The two states are among the biggest grain-farming states.

Russian exports will be good

While the weather in the past three months has been unkind to Australia however, it has been more benign for the world’s main wheat exporter, Russia. The country may account for as much as a fifth of global wheat exports in 2019/20.

Production of wheat in Russia has more than doubled since 2000. Russia’s wheat output in 2019/20 could reach 75m tonnes, around 5% higher year-on-year. This mighty harvest would be below the record set in 2017/18 but nevertheless eases the global balance.

The International Grains Council (IGC) puts the world ending stocks of wheat at 288.03m tonnes in 2019/20, 50,000 tonnes lower than in January but almost 10m tonnes higher than in 2018/19.

So while the drought has been punishing for Australia’s farmers, it should have minimal impact on international prices, apart from the predictable rush of blood that follows all downward revisions.

But investors perhaps will consider a 10m tonne ending stocks’ position as uncomfortably tight. The US Department of Agriculture (USDA) noted this month that "demand remains strong" particularly in Asia, where a shift from consumption of rice to that of wheat is continuing. If demand outstrips supply then 10m tonnes will be rapidly eroded - and prices will then really rocket.