September 2, 2008

Australian wheat crop needs rain, but could send CBOT prices plunging

Australia's wheat crop still needs more rain to reach its full potential, despite the rainfalls that brought some relief over the weekend, industry participants said Tuesday (September 2, 2008).

Over the past several days, many wheat crops, particularly in eastern Australia's northern growing areas, received a considerable boost from rains broadly in a range 20 millimeters to 50 mms, said Paul McKay, a director of Commodity Broking Services Pty Ltd.

While the weekend rains were well received, most cropping regions still need follow up rain to fulfill yield and quality potential, a report from GrainCorp said.

The rain breathed life into a rapidly deteriorating crop, Mackay said in a statement.

Mckay said it is possible the rain in Australia could be a catalyst for Chicago Board of Trade December wheat to break key support around US$7.80 a bushel, which if breached could send prices down a cliff face given the abundance of wheat in the Northern Hemisphere.

Most industry participants forecast an Australian wheat crop in a range 20 million to 24 million metric tonnes, assuming average seasonal conditions in spring.