July 18, 2008

 

Harbinger of drier weather lowers prospects for wheat in south-east Australia

Winter crops including wheat in southeast Australia continue to face the negative prospect of an Indian Ocean Dipole (IOD) in positive mode in coming months, which could lead to dry weather, stunting plant growth.

 

The outlook for an IOD+ "is now a popular prediction, which is not surprising since we pretty much have one now," according to a monthly seasonal conditions report issued late Thursday by Victoria state's Department of Primary Industries.

 

Under an IOD+, sea surface temperatures anomalies are cooler from Sumatra right through the Torres Strait north of Australia, according to the report.

 

An IOD+ in the past has often hindered the formation of northwest cloudbands - an important source of winter-spring rainfall in southeast Australia.

 

The government's Bureau of Meteorology has identified an IOD+ as a key factor in a drought that wrecked the 2007 wheat crop in New South Wales and neighboring areas of Victoria.

 

New South Wales typically accounts for 30 percent of national wheat production and Victoria about 10 percent to 15 percent, which in 2008 is officially estimated at 23.7 million tonnes.

 

A week ago, the USDA forecast Australian wheat output this year at 25.0 million tonnes, up 1.0 million tonnes from a month earlier and almost double the actual output last year of 13 million tonnes.

 

Meanwhile, the country's most active wheat futures contract - ASX January 2009 - fell a little Friday with a weather premium over CBOT December wheat futures narrowing, according to Angus Brown, a risk management adviser at Ag Concepts Unlimited.

 

Around 0625 GMT, the ASX contract last traded at AUS$324 a tonne, down AUS$1 from yesterday's settlement, with CBOT December wheat ex-basis valued at AUS$322, he said.

 

The ASX basis premium to Chicago has narrowed in recent days, but not as much as expected, as the actual rainfall received in Australia has not met expectations built up by forecasts, he said.

 

US wheat futures closed lower Thursday on spillover pressure from weakness in other markets and on forecasts for increasing world production.

 

The Australian government's Bureau of Meteorology forecasted widespread showers with thunderstorms and hail extending throughout the southwest Friday, clearing from the west Saturday, while scattered showers also are forecast in the coming days in the nation's southeast.