Australia wheat crop may shrink due to dry spell over WA

SYDNEY: Wheat output from the world's second largest exporter Australia may fall below 20 million tonnes during the 2012/13 season due to a dry spell across Western Australia, analysts say, which would further tighten global supplies and stoke prices.

Chicago Board Of Trade new-crop wheat futures have jumped 35 percent since mid-June following dry weather in the Black Sea region and the worst drought in 60-years in the United States, which wilted corn crops and dragged wheat prices higher.

Russia, the fourth largest wheat exporter, last week admitted it may limit grain exports if domestic prices continue to climb.

Western Australia produces at least a third of Australia's total wheat crop, making it the biggest producing state. Analysts estimated its wheat output to range between 5.5 million tonnes and 6.9 million tonnes this year, much lower than last year's record crop of 11.73 million tonnes.

Those estimates are also below the 7.1 million tonnes forecast made by the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) on September 11.

"If Western Australian wheat falls to 5.5 million tonnes, we are looking at Australian wheat production at less than 20 million tonnes," said Andrew Woodhouse, a grains analysts at Advance Trading Australiasia who pegs Western Australia's wheat output at 6.9 million tonnes.

Analysts CBH Group estimated the wheat output at 5.85-6.175 million tonnes, and said that if the weather remains dry throughout September, final production would be closer to the lower end of the estimate.

"At this point in the season further rains throughout September would protect the current yield estimates but not likely increase them," said David Capper, operations manager at CBH Group.

Between 5 and 10 millimetres of rain are forecast for Western Australia on Wednesday and Thursday, the Bureau of Meteorology said. To stop wheat production falling to 5.85 million, Western Australia needs 15-20 millimetres of rain during the next week, Capper added.

Australia cut its total wheat production forecast by 7 percent to 22.5 million tonnes earlier this month, warning that production could fall further if Western Australia did not receive enough rainfall during Spring.