August 21, 2009

Dry weather is raising concerns about wheat crops in northern New South Wales and Queensland but in Western Australia hopes are emerging that this year harvest could match last year bumper crops, industry participants said Friday.

 

For now, most national wheat production forecasts remain around 22 million to 23 million tonnes, but a continuation of dry weather in the northeast could see this number come under pressure.

 

"If we go for another two or three weeks with these sort of conditions with minimal rain it certainly going to cut yields heavily," Mark Martin, a risk management adviser and director at commodity manager MarketAg, said by telephone Friday. "If we don't get rain at the right time well certainly be in all sorts of strife."

 

"The big issue now is that the two-week rainfall forecast isn't looking too flash," he said by telephone from Willow Tree, a village on the Liverpool Plains in northern New South Wales.

 

Of actual wheat production of 21.4 million tonnes in the last crop year ended March 31, 2009, between six million and seven million tonnes was consumed domestically. This left around 15 million tonnes available for export, making Australia a major supplier to the global market and underpinning an Australian export trade valued at more than A$5 billion a year.

 

In a regular review of Pacific Basin El Nino indicators, the government Bureau of Meteorology reported Wednesday (Aug 19) that July and August have seen below average rainfall across much of eastern Australia, with particularly dry conditions in the northeast. Maximum temperatures have consistently been more than four degrees Celsius above normal over wide areas of Australia.

 

Looking at the season from another angle, marketing concern Meat & Livestock Australia Ltd. reported Friday that poor seasonal conditions and deteriorating pastures are forcing more beasts into markets. An Eastern Australian young cattle indicator price fell 4.3 percent this week, to be down 7.4 percent on year.

 

"Producers appear to be getting increasingly anxious about the season, especially following the run of disappointing spring seasons this decade," MLA said in a weekly market report.

 

Brett Cooper, senior client adviser at MF Global Australia Ltd., agreed there is some concern about the northeast wheat crop, but in Western Australia, which typically accounts for about 40 percent of national output and more than half Australia exports, the crop is "cruising along nicely."

 

"So far, any losses people are expecting in Queensland and potentially northern New South Wales are probably being offset by continued good conditions elsewhere," he said. "The market is alert but not alarmed just yet."

 

September is usually seen as the critical month for rainfall on winter crops.

 

In Western Australia, the monopoly logistics operator Cooperative Bulk Handling Ltd. is "hopeful" that with good finishing rainfall total grain production this crop year will match the 12.3 million tonnes of last crop year, though for now it is sticking with a forecast range for all grains of 10 million to 12 million tonnes, of which 70 percent typically is wheat.

 

CBH Senior Operations Manager, Michael Musgrave, said there has been widespread if light falls this week across the state wheat belt.

 

"The northern half of the Western Australian wheatbelt is well placed to produce a significant crop should finishing rains continue," he said in a statement issued to Dow Jones Newswires Friday.

 

Crops in the state southeast have received regular light falls but a larger rainfall event is needed to restore subsoil moisture, allowing the crop to withstand any extended dry patches that may come up during the remainder of the growing season, he said.

 

Most weather models show that a significant rainfall event is unlikely to happen in the next two weeks, Musgrave said.

 

Crops in South Australia and Victoria states have experienced similar weather conditions this season to those in Western Australia, Bureau of Meteorology data shows.