November 28, 2011

Australia's wheat output forecast was raised by the National Australia Bank Ltd. on Friday (Nov 25) from last month's 25.05 million tonnes to 26.6 million tonnes, further pressuring wheat prices.

Seasonal conditions remain strong with a bumper winter crop "on the cards and an equally strong summer crop around the corner," Michael Creed, the bank's agribusiness economist, said in a monthly rural commodities wrap.

The bank's production estimate is higher than others, which are mostly in a 25 million to 26 million tonnes range.

If achieved, the bank's forecast would be down from a record 27.9 million tonnes last crop year ended March 31, according to this year's agricultural census by the government's Bureau of Statistics.

Australia exported 18.5 million tonnes last marketing year ended September 30 and is usually one of the top five suppliers to the global trade after annual domestic demand of about six million tonnes is met.

Creed said the expected big wheat crops in Australia and Argentina have weighed on prices over the past month.

Feed grain prices will continue to weaken as there could be "a massive build up" of feed grains in coming months, which has the potential to be exacerbated by excess rainfall during harvest.

"The quality of the Australian crop will also have important implications for prices with recent rainfall predictions for northern and central New South Wales providing some cause for concern," he said.

The harvest in New South Wales has stalled in recent days in the face of widespread and in places heavy rainfall.

In the seven days to Friday morning, Dubbo airport received 74 millimeters of rain, Gunnedah 62 mm and West Wyalong 57 mm, according to the Bureau of Meteorology.

Growers already are seeing relatively low protein levels in their grain and could suffer further quality downgrading if the wet weather persists, GrainGrowers Ltd. General Manager of grower development Michael Southan said Thursday.