Australia Forecasts Increased Cotton, Sugar Output, Less Wheat

Cotton production in Australia, the fourth-largest shipper, may reach a record next year after rains filled dams, while sugar output may gain even after cyclone and flood damage, according to the government’s commodity forecaster.

Output of cotton may climb to 1.1 million metric tons in the year from July 1 compared with 839,000 tons this season, and the sugar crop may rise to 3.85 million tons from 3.62 million, the Australian Bureau of Agricultural & Resource Economics & Sciences said in a report today. The wheat harvest may drop 7.8 percent as lower yields offset an increase in the area, it said.

Global prices of farm commodities have surged on harvest disruptions and stronger demand, with the Food and Agriculture Organization’s World Food Price Index reaching a record in January. Increased Australian output of sugar and cotton may be part of a global response to the agricultural gains.

“Farmers globally are very adept at responding to higher prices,” Paul Morris, deputy executive director at the Canberra-based bureau, said in an interview yesterday. “We expect we will see a production response to that and we will see prices coming back down over the medium term.”

Cotton on ICE Futures U.S. in New York reached an all-time high $2.0893 a pound on Feb. 18, while raw sugar gained to a 30- year high of 36.08 cents a pound on Feb. 2.

Wet Weather

La Nina-linked wet weather brought record rainfall to parts of eastern Australia last year, ending drought and replenishing dams used for irrigating cotton, which is planted around November and mostly harvested from April.

The flooding cut the June-to-December sugar cane harvest to 3.6 million tons, the lowest level in about two decades, and washed away some crops planted for next season. Cane was further damaged after Cyclone Yasi hit northern Queensland in February. Australia is the third-largest shipper after Brazil and Thailand.

The sugar forecast was less than an estimate of 4 million tons made after the flooding. Output may reach 4.4 million tons in 2012-2013, it said. That’s still lower than production of 4.5 million tons in 2009-2010, before wet weather curbed output.

The area sown to wheat may gain to 13.8 million hectares (34.1 million acres) from 13.4 million, while output may drop to 24.26 million tons from a record 26.3 million, according to the bureau. The next crop will be planted from April to June.

Price levels for sheep, beef and wool may restrict gains in the area devoted to wheat after farmers had already swung land toward grains in recent years, Morris said.

“With prices of everything quite high, farmers are having to make a trade-off as to whether they grow more crops or move into livestock,” he said.

Canola production is forecast to rise to 2.23 million tons next year from 2.14 million this season, while wool output is expected to increase to 342 million kilograms from 335 million kilograms, the bureau said.

U.S. farmers will increase planting of corn, soybeans, wheat, cotton and four other crops 4.2 percent to 255.3 million acres in 2011 after adverse weather cut global output, boosting demand, the U.S. Department of Agriculture said Feb. 14.

To contact the reporter on this story: Wendy Pugh in Melbourne at wpugh@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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