June 8, 2012
Australia's 2012-13 wheat crop seen down 4% on dry weather
As dry weather threatens yields, Australia's wheat production in the year to June 2013 is likely to be almost 4% lower than the government's March estimate of 26 million tonnes and more than 15% below last year's record-large production.
The country is estimated to produce 25 million tonnes of wheat in 2012-13, according to a Reuters survey of 10 analysts, as farmers in the world's second largest exporter wrap up planting later this month.
A crop of 25 million tonnes will be close to average yields in Australia but any further cut in crop estimates could support the benchmark US wheat, which has lost almost 15% since hitting an eight-month high of US$7.22 a bushel on May 21.
Recent rains in drought-hit parts of Russia and pressure from the US winter crop harvest have eroded wheat prices, already weighed down by a risk-averse sentiment in financial markets amid the euro zone debt crisis.
Although rains last week in high-protein wheat producing eastern region of Australia have improved crop conditions, top growing Western Australia continues to remain dry, forcing farmers to seed wheat in the dry soil.
"On the east coast, we are looking at a very good subsoil moisture profile, and rain outlook over the next three months is quite positive," said Michael Creed, agribusiness economist, National Australia Bank said. "It looks like continued dryness in the coming three months (for Western Australia)."
Australia is a leading grains supplier to Asia's biggest importers such as Indonesia, Japan, China and South Korea, selling 21.5 million tonnes in 2011-12, according to the USDA data.
The country is likely to have 8.3 million tonnes of wheat in closing stocks at the end of the marketing year on September 30, down from nearly nine million tonnes last year, but much larger than the average stockpile of around 5-6 million tonnes seen in earlier years, the poll showed.
Much-needed rains in parched areas of Russia's grain belt and higher-than-expected yields from the US winter harvest have weighed recently on wheat prices, which outperformed other commodities in May when dryness threatened crops.
Chicago wheat prices finished 0.6% lower in May, compared with a 16% decline in corn, an 11% fall in soy and an 18% loss in cotton. Heavy rains in Russia's southern breadbasket in the past two weeks have halted damage to crops from a late spring drought and the yield outlook could improve if favourable weather lasts through the harvest, according to the state crop weather forecaster.
Private analytical firm Informa Economics raised its forecast of US 2012 winter wheat production to 1.676 billion bushels, from its previous estimate of 1.656 billion, trade sources said Wednesday (June 6). As of now, analysts remain bearish on wheat prices even as there is looming threat of an El Nino weather pattern returning to curb Asia's food output.
"In our view, wheat prices will decline from current levels over the next 12 months because of on-going comfortable wheat supplies, even with a modest decrease in production," said Luke Mathews, commodities strategist at the Commonwealth Bank of Australia in a report.
"World wheat inventories for 2012-13 can be revised lower by 18 million tonnes and still exceeds 170 million tonnes."
Australia's Bureau of Meteorology last month said the climate models it monitors indicate a possible return of the El Nino weather pattern, often linked to heavy rainfall and droughts, in the second half of 2012.
Western Australia, which accounts for at least a third of the country wheat output, is facing a dry weather with farmers left with just a week or two before the planting window closes. Western Australia and South Australia produce the most prime and standard wheat, which is in demand for milling across Asia.
"Western Australia is looking a bit dry which is a concern," said Stefan Meyer, a manager for cash markets at brokerage INTL FCStone in Sydney.
"It is still early and things will improve if it rains."
