August 28, 2012

Low rainfall affects Australia's 2012-13 wheat crop

As farmers were hurt at a time when world grain prices have shot up to near record peaks, low rainfall could halve the wheat crop in Australia's largest wheat exporting state in the 2012-13 crop year.

ANZ senior agricultural analyst Paul Deane said Western Australia's wheat output could fall to six million tonnes in the crop year that started on April 1--almost half of the 11.6 million tonnes grown last year and down from his current forecast of eight million tonnes--if plants don't get rain over the next month.

Latest official government forecasts from June expect a Western Australia winter wheat crop of about 8.6 million tonnes.

"Yield potential is already well below trend in the northern and eastern wheat belt due to the late start to the season and one of the driest Julys on record," Deane said. "Production prospects for the Western Australian wheat crop are delicately poised," he added.

Wheat prices have already risen about AUD100 (US$104) a tonne over the past three months as drought in the US and Russia--two of the world's largest wheat producers--has sparked fears of tighter world supplies during the 2012-13 crop year. This season's multi-milling wheat delivered from Geraldon, West Australia, is currently trading at AUD340 (US$352) a tonne, according to AWB, Cargill Inc.'s Australian unit.

National Australia Bank analysts predict that Australian farmers could find themselves AUD6 billion (US$6.3 billion) richer this year if they are able to meet government June projections for rural exports of AUD38 billion (US$39 billion).

High stocks left over from a bumper wheat crop out of Western Australia last year could help farmers to compensate for any shortfall this year.

ANZ's Deane said he expects exports in 2012-13 to remain roughly on par with 2011-12 at around 8.5 million tonnes--just below the record nine million shipped in 2003-04--due to the unprecedented levels of carryover stocks left from the previous season.

"Even with this strong level of exports, Western Australia will still have record stocks to carry into the next season," he said. "This provides a significant buffer to export availability even with an adverse production outcome," he added.