May 18, 2010

Low wheat prices discourage replanting in Australia

Farmers in the US are preparing to harvest wheat crops in the coming weeks, which could further depress wheat prices as global supplies increase, deterring Australian farmers from planting the commodity this year.

The bearish outlook for wheat, worth AUD5 billion (US$4.4 billion) in exports last year, came as Australia's rural services businesses and wheat traders prepared to deliver first-half profit results.

The best weather conditions in a decade for east-coast farmers were expected to buoy trading conditions for the region's major grain handler, GrainCorp, which was forecast to report a first-half operating net profit of AUD48.8 million (US$42.9 million), said JPMorgan.

However, a subsequent outbreak of the worst locust plague in decades could wreak havoc on spring crops while farmers, who had already suffered crop losses, may decide not to replant this year if wheat prices continued to fall.