As fears ease over dryness threatening the northern US Plains wheat, concerns are growing over Australia's newly-seeded crop, with an "exciting week for prices", amid talk of record dryness in Western Australia.
In Australia, new crop Sydney wheat futures for January delivery touched Aus$265 a tonne on Wednesday, the contract's highest in a year, reflecting domestic concerns as well as the lift given to international prices by the drought in the US spring wheat belt.
In Western Australia, Australia's top wheat-growing state, "soil moisture is currently record low", according to crop analysis group Lanworth, which said that levels were also "below average in South Australia, New South Wales and Queensland".
The group added that weather forecasts "call for little or no rainfall next week and trace amount of precipitation in the last week of June, with relatively warm temperatures.
"The warm and dry pattern will worsen soil moisture deficits."
The comments came as Lanworth pegged the Australian crop at 23.2m tonnes – 1.0m tonnes below the forecast from the official Abares bureau this week, which was in turn below estimates from the likes of the International Grains Council and the US Department of Agriculture.
"Although cool temperatures have dominated in southern and eastern portions of Australia, slowing soil moisture evaporation, the developing drought still pose great risks to wheat production and limit yield potential," Lanworth said.
Peter McMeekin, origination manager at mechant Nidera Australia, said that "virtually all the crop area now needs rain to germinate and/or properly establish as we move into the colder, less vigorous, winter phase of the growing season.
And "areas that remain unsown will remain that, in the absence of significant rain".
Mr McMeekin added that "the production concerns have definitely been reflected in both old and new crop domestic values over the past three weeks".
Indeed, New South Wales-based AgVantage said that "wheat has had an exciting week with prices starting to climb in an attention-grabbing way".
The merchant focused on the feed wheat market, where prices for delivery to Darling Downs in Queensland "spiked" Aus$20 a tonne week on week to Aus$290 a tonne.
However, it also noted the potential for a further squeeze on the high-protein wheat market, which is already facing the prospect of weak US production of spring wheat.
"If northern New South Wales does not have a good season, this will remove a large amount of prime protein area and therefore the supply of protein wheat from Australia, magnifying the protein deficit around the world."
AgVantage added that "the north eastern side of Australia is in the midst of a cold dry winter currently, with not much moisture forecasted for the near future".
However, it also noted that it was early days yet to get too gloomy on Australian crop prospects.
"Whilst you never write off an Australian crop in June, many eyes will be monitoring this situation to August when many will make their minds on crop potential."
By Mike Verdin