Australia's 2012-13 wheat crop seen shrinking, dry weather hurts
Australia's 2012/13 wheat output may drop almost a quarter from last year's record levels as dry weather curbs yields, analysts said, heightening global food supply worries triggered by a historic US drought and poor rains in the Black Sea region.
Copyright Reuters, 2012
Lower production in Australia, the world's No 2 wheat exporter after the United States, could fuel global prices that have surged almost 40 percent since early June as the worst drought in half a century gripped large swaths of US farmland. Australia's wheat production is expected to drop to 22-23 million tonnes, analysts estimated, about 5-9 percent below a government forecast of 24.1 million tonnes and almost a quarter less than last year's record output of 29.5 million tonnes. "The crop conditions have deteriorated," a Melbourne-based agricultural analyst said. "It is not shaping up to be a great spring and the outlook is for things to remain dry over the coming weeks."
September is usually a critical yield determining period for the wheat crop but not much rain is forecast over the next two weeks which could prompt traders and analysts to further lower their production estimates. Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) will update its output forecast on Tuesday.
Adverse weather in Australia and worries Russia, the No 4 wheat supplier, would limit exports following a drought-hit harvest boosted Chicago Board of Trade wheat futures for a third straight session on Monday. Australia's eastern grain belt, which produces high protein prime hard wheat, has received little rainfall in the last one month, although it has good subsoil moisture from rains earlier in the season.
Western Australia, which accounts for a third of the country's wheat output, has been rain-deficient with some areas seeing the lowest rainfall on record during July and August. "If you look at Western Australia, there are several areas that I'm forecasting to have lower yields because of the drier conditions," said Andrew Woodhouse, grains analyst at Advance Trading Australasia. "I think yield potential across those regions could recover if we get a good rainfall."
DRY OUTLOOK But forecasters are calling for mostly dry weather. Both the east coast and Western Australia (WA) are set for another five days of dry weather, the Australian Bureau of Meteorology forecasts. "Australian wheat crop is getting smaller," said Brett Cooper, a senior manager of markets at FCStone Australia. "While there is no rain on the map, the critical thing for Australian crop is temperatures at this stage."
Analysts said cold temperatures earlier in the season contributed to Western Australia and east coast crops being slightly behind normal in terms of development. The New South Wales Department of Primary Industry and Department of Agriculture and Food Western Australia warned in July that frosts had slowed crop development, which may extend the growing season later into the year.
Australian wheat prices have started climbing in Asia's physical market because of the dryness. "There will be a change in the relationship between Australian and US wheat prices," said another analyst who was not willing to be named because of his company policy. "Australian wheat is expected to trade at a premium to other origins, including the US over the next few months."
Last week, US soft white wheat was quoted around $380 a tonne, including cost and freight (C&F), in Asia while spring wheat with 14 percent protein was being priced at $435 a tonne. This compares to Australian prime wheat being offered at $385 a tonne, C&F, and Australian prime hard wheat with 13 percent protein at $445 a tonne. This could slow Australia wheat sales which got off to a strong start as buyers snapped up cargoes, fearing Russian ban on exports.