June 13, 2013

 

 

Australia's wheat production is predicted to increase this crop year, which would help the country replenish its granaries, though the expected extra supply does not address immediate concerns over global availability of high-quality milling grades.

 

Tight supply in Australia, the world's second-largest wheat exporter after the US and a significant supplier to East Asia, was thrust into the spotlight after some buyers shunned US wheat following the recent discovery of an unapproved genetically modified strain at an Oregon farm.

 

Australia might have easily stepped in to meet incremental demand created by a supply disruption elsewhere two years ago, when it produced a record of nearly 30 million tonnes of the grain, but output fell 26% in the year that ended March 31.

 

The Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES) on Wednesday (Jun 5) revised its output forecast for 2013-14 to 25.4 million tonnes, up 2% from its last forecast and up 15% from 2012-13 production.

 

The winter rainfall outlook indicates an above-average chance of exceeding median rainfall in most eastern wheat areas and an average chance of doing so in Western Australia State, ABARES said in a quarterly report.

 

The national area planted to wheat will likely to rise by 3% to 13.7 million hectares, it said. Farmers across Australia are planting wheat for the current crop, which is due to be harvested starting in October.

 

In addition to reduced output, Australian wheat supplies have dwindled due to strong exports and increased domestic demand. Prices have risen by more than US$50 a tonne in some regions over the past two months.

 

Many parts of Australia are on track to run out of wheat by August, and national stocks will total only two million to three million tonnes by the time growers start to bring in the new crop, Alan Winney, chief executive of Victoria-based Emerald Grain, said. Last October, stocks hit their annual low point at eight million tonnes.

 

All major Australian wheat growing regions will likely record rises in output next year, but the bulk of gains will be in Western Australia as the state recovers from a drought, ABARES data showed.

 

Europe and the Black Sea region are also recovering from drought, and bumper harvests are likely during the next few months, pushing up global supplies. Global wheat output will rise 6.5% to a record 702 million tonnes in 2013, the Agricultural Market Information System said last week.

 

Analysts, however, caution that supply of high-quality wheat is tight because of a smaller winter wheat crop and a delay in spring plantings in the US. They also note that the next Australian harvest is still four months away.

 

"The tightness obviously will not ease until the new crop becomes available—and whether that demand is picked up by the US or the Black Sea or Europe depends a little on what wheat quality buyers are chasing," said Tim Legoe, an analyst with Victoria-based Lachstock Consulting.

 

Australia's barley production will likely increase by 10% to 7.4 million tonnes in 2013-14, while rapeseed production will likely fall by 17% to 3.2 million tonnes, ABARES said.