Miller Magazine Issue: 149 May 2022

76 COVER STORY MILLER / MAY 2022 While supplies from the world's most important export- ers are constrained, the USA is facing a downgrade in their wheat potential. The lingering effects of the La Nina, are causing large parts of the United States to fall into drought. The overall US winter wheat crop is showing good to ex- cellent conditions of 27%, the lowest since 1989. Predicting the weather is difficult, but traditionally a La Nina has correlated with dry conditions in the US, but it is not all bad. Australia is a major beneficiary of La Nina. 2018 and 2019 were terrible droughts which took their toll on the Australian grain industry, however, those years feel like distant memories. The past two years were the 1st, and 2nd largest wheat crops that Australia has harvested, and 2022 is in position to be 3rd largest. The soil moisture levels around large parts of the Aus- tralian cropping regions has been close to perfect, with more rainfall forecast. The local forecaster has parts of Australia receiving record rainfall during May. This is all positive for another fantastic year of production in 2022, weather permitting, all going well. The wheat export program has been working overtime during 2022 to export our country's record production. Typically the export program in Australia is front-load- ed, with most of the exports occuring during the first six months after harvest. This season, Australian exporters have been maintaining a strong pace. Due to high overseas prices, the incentive to export is available to the marketplace, and we antici- pate that exports will be higher than in 2021, when 26.1mmt was shipped. The question is how much, as supply chains come under considerable pressure. Typically Australian wheat prices have traded at a signif- icant premium to overseas values. The chart below shows the monthly average basis between Chicago and ASX wheat futures since 2010. There were times of extreme premiums during the recent drought. The current situation is showing an extreme discount, making Australian wheat very competitive versus the rest of the world. The heavy discounting also applies to the 2022 harvest, with a discount of approx A$130.