Reduced production estimates by Australia's chief government commodities forecaster and the South Australia state government did not affect Australia's most active wheat futures contract, ASX January, Wednesday, 29 October 2008.
At around 0540 GMT, ASX January wheat was not traded, at A$275.00 a tonne on a spread of A$269.00 to A$274.00, as a stronger Australian dollar exchange rate offset a positive US lead, said traders. The contract has trended steadily downward from an intraday peak of A$392 two months ago.
Brett Cooper, a senior client adviser at MF Global Australia Ltd., said improving crop forecasts in Australia's biggest production states, New South Wales and Western Australia, were more than offset ongoing crop losses in Victoria and South Australia, maintaining the market's heavy tone.
The Australian Bureau of Agricultural and Resource Economics earlier Wednesday, 29 October 2008 cut its prediction for the 2008-09 wheat crop to 19.9 million tonnes, down some 11 percent since a September forecast.
A lack of rainfall across Victoria, South Australia and southern New South Wales has prompted widespread crop failures, nearly halving expected wheat output in Victoria to 1.4 million tonnes, said Abare in a statement.
Still, despite the poor spring in some areas, total wheat production is forecast to be around 7 million tonnes above last year's drought-affected harvest, said Philip Glyde, Abare's executive director.
Dry spring weather led to a further downgrade of production estimates for winter crops, including wheat, in South Australia state.
In its latest crop report, the state's agriculture department estimated total output this year at 4.74 million tonnes, down 13 percent from its month-earlier report. Wheat is estimated at 2.34 million tonnes with barley at 1.72 million tonnes.
MF Global's Cooper said the South Australia forecast was about the same as compared to last year and as such, not a market mover.
Total production in South Australia last year reached 4.88 million tonnes, including 2.35 million tonnes of wheat and 1.78 million tonnes of barley.
MF Global has a production forecast of around 21 million tonnes, but anywhere from 19.5 million to 22 million tonnes is pretty much what people are looking at.