Wheat Production in Parts of Australia Seen Hurt by Dry Weather

Dry conditions are set to curb output in the northern wheat-growing regions of Australia, the world’s fourth-biggest exporter, as producers stay on watch for El Nino, according to Australia & New Zealand Banking Group Ltd. and National Australia Bank Ltd.

Farmers in northern New South Wales and Queensland are challenged by sporadic rainfall and low subsoil moisture, NAB said in a report e-mailed today. New South Wales is the second-biggest wheat producer. In contrast, growing areas in South Australia, southern New South Wales, Victoria and Western Australia have had a good start, it said.

Australia is on alert for an El Nino weather pattern, which can bring below-average rain to the south and east, the Bureau of Meteorology said July 15. The weather bureau forecasts the event for spring, which begins in September. Futures in Chicago tumbled 17 percent in the past year on expectations global reserves will climb to a three-year high.

“A lack of rainfall in July in northern New South Wales and Queensland is starting to loom as an issue for crop development,” ANZ analyst Paul Deane said in an e-mailed report today. “The wheat crop in the south of Australia has the potential for above-average yields. The odds of achieving this have improved with confirmation that the forecast El Nino will only be a weak event.”

El Nino is the biggest concern for the wheat industry over coming months, according to NAB. An El Nino in early spring would likely lower yields, while an event in November or December may boost yields, it said. The weather bureau said this month that the event is unlikely to be a strong one.

Wheat output may total 24.6 million metric tons in 2014-2015 from a March estimate of 24.8 million tons and versus 27 million tons a year earlier, the Australian Bureau of Agricultural and Resource Economics and Sciences said June 11.

Below-average rainfall persisted on the New South Wales central and north coasts in June, according to the Bureau of Meteorology. About 75 percent of Queensland is in drought, according to the state’s government.

To contact the reporter on this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

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

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