September 11, 2023


Australia faces wheat production slump due to El Nino drought



Australia, the world's second-largest wheat exporter, braces for a significant reduction in its 2023/24 wheat production forecast, as the El Nino weather pattern triggers dry conditions, impacting yields, The Star reported.


This forecast adjustment is set to tighten global wheat supplies already strained by poor harvests in rival exporting nations.


As a pivotal supplier to major buyers like China, Indonesia, and Japan, Australia's agricultural fortunes hold sway in the global wheat market. The strengthening El Nino event has resulted in extended dry weather conditions following an already record-breaking warm winter.


The El Nino phenomenon and the drought conditions it spawns pose a severe threat to food producers across Asia. Australian wheat, along with palm oil and rice production in Southeast Asia, faces particular vulnerability to these climatic challenges.


Ole Houe, from agricultural brokerage IKON Commodities, said that compared to last year, the crop's going to be over 10 million tonnes smaller, characterising this as a substantial loss.


Market experts and traders anticipate that the Australian Bureau of Agricultural and Resource Economics and Sciences (Abares) will revise its initial June production estimate of 26.2 million tonnes downward by roughly one million tonnes. This prediction follows a 34% decline from the previous year's output.


This downward revision is occurring against the backdrop of three consecutive years of record-breaking harvests in Australia, thanks to abundant rainfall.


The adverse weather conditions are poised to drive global wheat stockpiles among major exporters to their lowest levels in more than a decade, as per a Reuters analysis. This trend aligns with Canada, the fourth-largest wheat exporter globally, recently announcing a reduction in output due to dry weather.


Argentina's crops are also bearing the brunt of adverse weather conditions, while heavy rainfall has hampered wheat production in China.


One Singapore-based trader, who supplies Australian wheat to importers in Asia, said that the Australian crop is likely to be below 25 million tonnes, as it has been hot and dry, especially on the east coast and some parts of Western Australia.


Wheat prices have contracted by 25% this year, primarily due to Russia's robust wheat supply, even amidst its conflict with Ukraine.


-      The Star

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