October 3, 2011


Australian favourable weather raises wheat prospect



Positive weather in Australia is increasing the prospect of wheat although dryness caused by La Nina is affecting crops in Argentina, Ukraine and the US.


"Australian grain production prospects have improved because of heavy, widespread rain of the past few days," Luke Mathews at Commonwealth Bank of Australia said, following rainfall of nearly three inches in one day in some parts of New South Wales.


In Western Australia, whose harvest last season was dogged by drought, rain has put the state on track to return to its historical record of producing roughly 40% of the national crop.


"The Western Australia harvest is, for only the third time in history, to exceed nine million tonnes after above-average rainfall in September", an Australia & New Zealand Bank's analyst said.


The estimate is ahead of that of Australia's official crop bureau, Abares, which has pegged the Western Australia crop at nine million tonnes, as well as CBA, which has put it at eight million tonnes.


It contrasts with waning hopes for crops in many other countries, amid fears of a return of La Nina, the chances of which official Australian forecasters themselves warned on Wednesday (Sep 28) were increasing, noting cooler Pacific water temperatures.


La Nina weather patterns are associated with wet springs in eastern Australia as seen last year, when the damp spilled over into dismally wet harvest conditions too and typically bring above average moisture to Western Australia too, despite 2010's record.


However, they are associated with dryness in, for instance, Argentina, where the Buenos Aires Cereals Exchange warned that rains over the past week had only bought partial relief for stressed wheat.


"The need for new rain is more pressing if average yields are to be obtained," the exchange said


In the US, many scientists also blame La Nina for the dryness continuing to affect the US South, depressing winter grain sowings.


Winter wheat plantings in Texas and Oklahoma are running at less than half the normal pace, USDA data show.


Meanwhile, in Ukraine, the farm ministry has warned of a drop in wheat sowings this year because of dryness, and official weather forecasters warned on Thursday (Sep 27) that at least 10% of wheat that has already been planted is going to be lost.


Agritel's Kiev office said on Friday (Sep 30) that while some parts of Ukraine had received rain this week, amounts were insufficient in the most productive regions to balance drought that impacted winter sowing.


ANZ's analyst added that the bumper Western Australia harvest could confront the state with a challenge to find export homes for the crop, of which some seven million tonnes may be shipped.


"This is against a background of potentially large wheat volumes emanating from the Black Sea," a fierce price competitor, he said.


While some five million tonnes was likely to be sold to Western Australia's historic customers, such as Japan, Korea and Indonesia, this will leave two million tonnes that will need to be sold to the less predictable markets of India, China, the Middle East and North Africa.


Reliance on Egypt, which would bring Australia more directly into competition with the Black Sea exporters, would bring significant pressure to Western Australia wheat prices, compared with those in the east.