Australian grain: rain raises hope in drought areas

More rain in parts of Australia's drought-stricken wheat and barley belt has raised hopes that planting can proceed after months of dry weather. Rain continued to fall in growing areas across South Australia and Victoria on Friday, after light to moderate falls in the previous two days. The worst drought-hit state, New South Wales, remained dry, but rain-bearing low systems were forecast by the weather bureau to move across the large grains-producing state over the weekend.
Falls on Thursday were generally around 15 millimetres (0.6 inch), but heavier falls were taking place on Friday throughout the Mallee and Whimper growing areas in Victoria, and in parts of South Australia's northern agricultural areas.
"Farmers would be looking for further falls," Ryan McKinley, spokesman for wheat exporter AWB Ltd, said on Friday. "That will benefit crops that have been dry sown and will also hopefully give a good base on which a lot of them could plant."
The rain came just days after the government's Australian Bureau of Agricultural and Resource Economics slashed its forecast of Australia's new wheat crop by 29 percent to 16 million tonnes, down by 21 percent on the last crop.
Australian domestic wheat prices fell by around A$22 ($17) a tonne this week, to A$192.50 a tonne on Friday for milling wheat futures quoted on the Australian Stock Exchange.
This wiped out around half of the A$40 a tonne drought premium which had built up in previous months, and showed that the market was more convinced by the rain forecast than by the bureau's forecast of the size of the next crop.
"It's probably an aggressive cut," grains broker Rob Imbrue of Farmarco said of the bureau's forecast. "If the rain produces this weekend its going to be too drastic a cut.
If it doesn't then potentially its realistic," he said. With Australia normally the second largest exporter in the world after the United States, the forecast cut had supported wheat futures on the Chicago Board of Trade on Tuesday.
However, the rain which began falling a few days later, just in time to allow planting of wheat crops in drought-ravaged eastern regions, produced a bearish influence on Chicago prices.
AWB said on Tuesday that it was unmoved by the forecast cut by the bureau and was holding its estimate of the crop for the year to March 31 at 21-23 million tonnes.