September 6, 2007

Australia's 2007 wheat crop may reach 16 million tonnes

Australia's wheat crop this year may be no more than around 16 million tonnes, way below the officially forecast 22.5 million tonnes, as dry weather continues to affect crops across the country, Tony Smith, director and senior commodity trader with Plumgrove Commodity Trading Solutions Australia, said Wednesday (September 5).

The country produced around 10 million tonnes of wheat last year.

Speaking on the sidelines of the 4th Southeast Asia-US Agricultural Cooperators' Conference, Smith said Western Australia is currently experiencing dry weather, while the east coast hasn't had sufficient rains for the past six weeks.

The lower-than-expected Australian crop would likely drive Chicago Board of Trade (CBOT) wheat prices as high as US$9 per bushel in the coming weeks, he said.

At 0930 GMT, the most active December wheat futures contract on CBOT had already hit the daily limit-up level in electronic trading ahead of the start of US pit trading, gaining 30 cents to reach an all-time high of US$8.35/bushel.

The contract closed limit-up, or 30 cents higher, at US$8.05/bushel in pit trading Tuesday, with unfilled orders totalling about 1,500 contracts, as estimated by traders.

Smith said Australia's wheat exports in 2008 could fall to around 10 million tonnes, with exports really picking up only from April. Australian exports this year are estimated to be around 12 million tonnes.

"There is a very real fear that farmers may hold back their stocks until the government comes out with a clear-cut wheat export policy, expected in March 2008," he said.

However, some Australian farmers who need immediate cash may start selling some of the crop as the harvest begins in late November, he noted.