The biggest grain-handler in Australia’s largest wheat-producing state has increased its crop forecast after late rains eased dryness before the harvest starts next month, boosting global supply prospects. Prices fell.
CBH Group may receive 10 million metric tons to 10.6 million tons of Western Australian grain, up from 9 million tons forecast a few weeks ago, according to David Capper, general manager operations at the Perth-based company, who said wheat receivals will be about 6.5 million tons. The state’s total grain crop will be 1 million tons higher than CBH’s share, he said. Last year, state output was 10.9 million tons, government data show. Australia is the world’s third-largest wheat exporter.
The rains reduced concern that yields may decline, boosting supplies for the state’s biggest buyers in Indonesia, Japan and Korea. Wheat has lost 27 percent over the past year in Chicago on prospects for record global output as corn and soybean prices dropped, easing world food costs. The International Grains Council raised its global supply forecasts for 2013-2014 on Aug. 30, citing bigger harvests in Europe and South America.
“It’s unbelievable how things have turned around,” said Jeremy Marwick, 37, a fifth-generation farmer with 2,500 hectares (6,200 acres), including wheat, east of Perth. “It’s a long time until harvest time yet, but it’s looking good,” he said in an interview. His father, Gordon, 63, forecasts a yield of 2.5 tons of wheat per hectare from 2.2 to 2.3 tons last year.
Western Australia is set to overtake New South Wales as the country’s biggest wheat producer as the crop rebounds from last year’s dry weather-affected harvest, boosting national output 15 percent, according to federal government estimates. Last year, CBH’s total grain receivals were 9.1 million tons, with 5.6 million tons of wheat, according to the company.
Wheat for December delivery lost as much as 0.6 percent to $6.4325 a bushel on the Chicago Board of Trade, the lowest since Aug. 23, and was $6.45 at 3:43 p.m. in Perth. Most-active futures touched $6.355 on Aug. 14, the lowest since June 2012. Corn has lost 42 percent in Chicago over 12 months, while soybeans retreated 23 percent. Global food costs tracked by the United Nations fell in July for a third month.
“We had zero rain during June, zero rain through the first half of July and even in the second half of July rain was quite sporadic,” Capper said in an interview in Perth. “Through August we’ve had some really, really good rains.”
World wheat production may increase 7.6 percent to a record 705.4 million tons in 2013-2014, the U.S. Department of Agriculture estimates. Canadian output will gain 8.5 percent and Russian production will climb 43 percent, countering a 6.8 percent drop in the U.S. crop, it predicts. The London-based IGC said that global wheat output will climb 5.7 percent to 691 million tons, according to an e-mailed report.
“A poor-production outcome is less likely,” said Luke Mathews, a commodity strategist at Commonwealth Bank of Australia in Sydney, who forecasts state wheat output at about 7.2 million tons. “August saw stabilization and improvement in crop conditions in Western Australia but some deterioration in the east. There’s a quite a different composition geographically than the market forecast a few months ago.”
Western Australia’s wheat output will reach 8.8 million tons after tumbling 38 percent to 6.9 million tons last year, the Australian Bureau of Agricultural and Resource Economics and Sciences said in June. The bureau is scheduled to update its production forecasts on Sept. 10.
While Capper’s grain-output forecast is in line with state’s long-term average, dry weather can cut yields. The grain harvest dropped to 9.1 million tons in 2012-2013, a year after climbing to a record 15 million tons, according to CBH. This year, some regions may see production at an all-time high, while others curb output after the dry weather, Capper said.
CBH, Australia’s biggest cooperative, is owned and controlled by more than 4,000 grain growers. The company receives and exports about 95 percent of the Western Australian grain harvest.
Australia shipped 19 million tons of wheat overseas in 2012-2013, according to the USDA. That compares with exports of 22.2 million tons from the European Union and 27.4 million from the U.S. Canada ranked fourth with exports of 18.8 million.