Production problems for wheat crops in two major exporting countries could push prices higher in the coming months.

USDA’s Sept. 12 supply and demand estimate pegged lower production for wheat crops in Argentina and Australia, and the crops could decline even further, according to analyst Mike Kruger, president of a grain marketing advisory service located in North Dakota.

“It’s been very dry in Australia for a year now,” said Kruger, speaking at a press conference at the Minneapolis Grain Exchange. “Over the last few months, USDA has dropped their crop from 23 million tons, to 21.5 million tons to today’s 19.5 million tons.”

Kruger says most private analysts are looking at a bottom line figure of 16 million to 18 million tons for Australia, “so USDA is probably a little bit conservative leaving it where it is.”

Argentina has had similar problems with drought, prompting USDA to drop its estimated crop production by 250,000 tons, from 13.5 million tons to 13.25 million tons. “Again, I think USDA is a little conservative there. I think most analysts are thinking the crop is between 12.5 million and 13 million tons.”

As a result of the declines, USDA reduced total estimated world wheat production by 2 million tons and reduced wheat ending stocks by a corresponding amount. The world wheat ending stocks-to-use ratio is now the smallest since the 1960s.

USDA also increased India’s import estimate from 4.5 million tons to 6 million tons.

USDA reduced U.S. wheat ending stocks by 5 million bushels, from 434 million bushels to 429 million bushels. The ending stocks figure is considered tight by analysts.

“Overall, the world wheat numbers still indicate that at some time this market will give us higher prices. We have smaller crops in all of the major wheat exporting countries, except Canada. The critical issue is what the Australian crop turns out to be, 16 million tons or 18 million tons, and what goes on in Argentina. I look for the wheat market to give us another move back to the old highs.”

USDA’s raised its production estimate for U.S. corn and soybeans, but the negative nature of the larger crops should be offset by increased demand. The only question is when.

Corn production was estimated at 11.11 billion bushels, and corn yield at 154 bushels per acre, both numbers larger than what the market was looking for, according to Kruger.

USDA reduced corn harvested acreage by 300,000 bushels — a number to keep an eye on over the next few months, according to Kruger. “A lot of people are saying USDA has not reduced harvested acreage enough because of drought problems in both Dakotas, western Nebraska and some of Kansas.”

USDA also cut corn ending stocks by 12 million bushels. China’s corn crop, once thought to be hurt significantly by drought, was also left unchanged from the previous month.

The U.S. soybean crop grew by 165 million bushels from last month, to 3.09 billion bushels, and estimated average soybean yields were raised 2.2 bushels per acre from last month. The higher production is due to milder temperatures in mid- to late July.

Ending stocks were increased by 80 million bushels, to 530 million bushels. The impact of the larger crop was cushioned by an increase in the export estimate of 80 million bushels, and an increase in the crushing estimate for soybeans.

As for corn and soybean prices, “it’s going to be very difficult for this market to get over the fact that we are weeks away from harvesting an 11 billion-bushel corn crop and a 3-plus billion-bushel soybean crop.

“But after that, demand takes over quickly, particularly in corn. The world markets have yet to grasp the impact of what’s going on in this country in terms of corn consumption via ethanol. With smaller exports from other countries, the corn export picture is going to be stronger than people think.

“The next big news in the soybean market, once the United States moves past its own harvest, is how many acres of soybeans are going to be planted in Brazil. A lot of people are suggesting a reduction of 10 percent, and maybe a little more due to weakness in the farming economy, particularly on the soybean side.”

e-mail: erobinson@farmpress.com