November 9, 2012

As unfriendly crop weather dents yields, Australia's 2012-13 wheat output estimates were cut by analysts and traders to 20.47 million tonnes while exports might shrink to a three-year low.

Both forecasts fall significantly short of most recent government estimates, with the output projection indicating a drop of more than 30% from last year's record harvest.

Australia is the world's second largest wheat exporter and worries about its crop at a time of lower output in Argentina and fears of export curbs by Russia and Ukraine are raising concerns about global food supplies. The fears have supported benchmark Chicago Board of Trade wheat, which is up 3% this week, having gained 34% in the last five months.

Reuters surveyed 10 analysts and traders, and their average estimate for the wheat crop came in at 20.47 million tonnes, or 9% below Australia's official forecast of 22.5 million tonnes reported in September. Australia's output last year was at an all-time high of 29.5 million tonnes. An earlier poll had forecast output at 21.44 million tonnes.

"With the lower production that we are going to see here this year, the export capacity is just not going to be there," said Graydon Chong, a senior analyst for grains and oilseeds at Rabobank.

The poll pegged wheat exports at an average of 16.85 million tonnes, the lowest since 13.73 million tonnes were shipped in the 2009-10 season, data from the Australian Bureau of Agriculture and Resource Economics and Sciences shows.

The figure would also be about 27% below 2011-12's record exports of 23.04 million tonnes and fall 25% short of an Australian government estimate of 22.5 million tonnes. Export volumes typically include stocks carried over from the previous year.

The majority of Australian wheat is sent to South East Asia and its key consumers are Indonesia, Japan and China.

Analysts said lower output was likely to boost prices of Australian wheat, which could prompt Asian customers to seek a substitute in US wheat, which freight costs usually make uncompetitive. Ending stocks are set to tighten significantly, falling to a four-year low.

On average the traders and analysts pegged 2012-13 wheat ending stocks at 3.47 million tonnes, which would be the lowest level since the 2008-09 season when 3.42 million tonnes was held in storage. The ending stock average is down more than 51% from the 7.2 million tonnes in storage at the end of the 2011-12 season.