ARLINGTON, VIRGINIA — With a small portion of 2015-16 world wheat production still in Southern Hemisphere fields, KCBT hard red winter (HRW) wheat futures have fallen 34¢ since early November based on bearish fundamentals, U.S. Wheat Associates reported on Dec. 3. Record global stocks and the strongest U.S. dollar in 12 years have combined with record low ocean freight rates to expand the reach of cheap Black Sea wheat, limiting HRW export demand.

Adding additional pressure to the markets is the relatively good condition of the U.S. winter wheat crop. In its Nov. 30 Crop Progress report, U.S. Department of Agriculture (USDA) National Agricultural Statistics Service (NASS) said winter wheat condition (including HRW) improved 2 percentage points from the prior week. The report rated 55% of the crop good to excellent compared to 58% in 2014 on the same date. Winter wheat emergence is also on pace with the 5-year average at 93%.

Topsoil and subsoil moisture levels across the U.S. are also more favorable than last year, with notable exceptions in parts of the western states following the fifth year of drought conditions. NASS rated overall topsoil moisture for the U.S. at 82% adequate or surplus levels, compared to 70% on the same date last year. NASS reported a similar trend with subsoil moisture, rating 75% as adequate or surplus compared to 67% in 2014.

These factors combine to make this a buyers’ market. To date, the only bullish price news for the 2015-16 crop comes from weather conditions attributed by some to El Niño effects in the Southern Hemisphere. That region accounts for an average of only about 7% of global wheat production but a very significant 19% of global wheat exports.

As of Nov. 26, the harvest in Argentina, which exports an average of 75% of annual wheat production, is 20% complete. That is significantly behind last year’s pace of 31%. Heavy rains that delayed harvest for much of November have also resulted in some quality downgrading according to Bolsa de Cereales, the Argentina Grain Exchange. The International Grains Council (IGC) expects Argentina to harvest 10,400,000 tonnes, which is 25% less than 2014-15, and attributes that change to less planted area.

The same heavy rains that delayed harvest in Argentina also affected Brazil’s southern wheat growing regions and caused loss of yield potential and quality downgrades, according to the Dec. 1 IGC report. On average, Brazil imports 6,760,000 tonnes of wheat with domestic production accounting for the other half of its annual consumption. Time will reveal its final quality, but a private agronomist recently told a Brazilian farm publication that, “This wheat crop is to be forgotten!” USDA currently expects Brazil wheat production to be similar to 2014-15 levels at 6,000,000 tonnes, which is 10% greater than the five-year average. However, the apparent quality damage in both Argentina and Brazil could lead to higher domestic wheat feeding in both countries and thus a need for more imports of milling wheat into Brazil from outside of the region.

In its December 2015 crop report, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) lowered its estimate for Australian wheat production to 24,000,000 tonnes, down 5% from its September estimate, but still 1% higher than 2014-15 levels. Hot, dry conditions from the strongest El Niño in 20 years persisted across the country, though Reuters reports that adequate subsoil moisture prevented any significant yield potential decreases. Untimely rains in late October and November slowed harvest, but ABARES said the rain did not hurt overall crop quality.

Buyers and sellers will continue to watch the Southern Hemisphere harvest for late changes to wheat market fundamentals as the 2015-16 harvest wraps up. However, with the much larger Northern Hemisphere winter wheat crop headed into dormancy, there appear to be few changes on the horizon to change the underlying fundamentals that are driving this global buyers’ market in wheat.