Australia reduced its wheat production forecast after dry weather in the biggest producing states harmed crops, curbing supplies available for export from the world’s third-biggest shipper.
Farmers are set to harvest 24.5 million metric tons in 2013-2014 from 25.4 million tons estimated in June and 22.1 million tons a year earlier, the Australian Bureau of Agricultural and Resource Economics and Sciences said in a report today. Exports may reach 19.5 million tons in the year starting Oct. 1, down from 19.6 million tons predicted in June and 19.8 million tons a year earlier, it said.
Wheat lost 17 percent this year on expectations that increased production in Canada and Russia will boost global output to a record. World food prices fell for a fourth month in August to the lowest level in more than a year on lower grain prices as corn slumped 34 percent this year and soybeans lost 4.5 percent, according to the United Nations. A smaller-than-expected Australian crop is “a major risk for the world” and may help push prices higher, according to Macquarie Group Ltd.
“Northwest and central-west New South Wales is now very much looking for urgent rain over the next couple of weeks to arrest further yield declines,” said Luke Mathews, a commodity strategist at Commonwealth Bank of Australia. While rain in Western Australia in August and early September has helped stabilize crops, conditions are worse than when Abares released their previous crop estimates, he said by phone from Sydney.
Wheat for December delivery advanced as much as 0.5 percent to $6.445 a bushel on the Chicago Board of Trade and was at $6.4375 by 3:52 p.m. in Singapore.
Western Australian growers will collect 7.3 million tons in 2013-2014 compared with 8.8 million tons forecast in June, said the bureau, also known as Abares. That will still put the state ahead of last year’s top producer New South Wales, which will harvest 7.2 million tons from 7.6 million tons estimated in June.
CBH Group, Western Australia’s biggest grain handler, said last week that it expects to receive about 6.5 million tons of wheat. The company collects and exports about 95 percent of the state’s grain harvest. The state has an equal chance of a wetter or drier-than-normal spring, the Bureau of Meteorology predicts.
“Below-average rainfall was received in the northern regions of the Western Australian grains belt, while rainfall was average to very much above average for much of the southern region,” Abares said in today’s report. “Sufficient and timely rainfall is required over spring.”
Abares raised its estimate for area planted to wheat to 13.71 million hectares (33.9 million acres) from 13.68 million hectares forecast in June. Canola production may reach 3.3 million tons from 3.2 million tons projected in June, the bureau said. Barley output is expected to total 7.7 million tons, up from a June estimate of 7.4 million tons, it said.
Australia’s winter-crop production, including wheat, barley and canola, may total 39.2 million tons from 36.5 million tons a year earlier, Abares said. Australian farmers are set to begin harvesting wheat next month.
The Abares wheat estimate compares with 25.5 million tons forecast by the U.S. Department of Agriculture, which predicts the country to ship 19 million tons for a second year. While Australia was the biggest exporter in 2012-2013 after the U.S. and the European Union, it may drop to rank fourth in 2013-2014 as Canada boosts shipments, according to the USDA.
Global wheat production will reach a record 705.4 million tons in 2013-2014, the USDA estimates. An 8.5 percent increase from Canada and gains of 36 percent in Ukraine and 43 percent in Russia will counter a 6.8 percent drop in the U.S., according to the agency. The USDA will update its estimates on Sept. 12.
The projected rebound follows last year’s dry weather that hurt harvests from Australia to Russia, pushing prices to a four-year high of $9.4725 a bushel in July 2012. Prices fell to $6.355 on Aug. 14, the lowest since June 2012.
A smaller-than-expected Australian harvest and tight inventories will hamper exports, Macquarie said in a Sept. 6 report. If this production is lost, prices would have to trade higher in order to ration demand, it said.
World stockpiles will drop to a five-year low by June 30, the USDA estimates. Futures will rise 15 percent to $7.40 a bushel by the start of the next season on July 1, according to the median of 10 analyst estimates compiled by Bloomberg.
Cotton production in Australia, the world’s third-biggest exporter, may reach 990,000 tons in 2013-2014 compared with 995,000 tons forecast in June, according to Abares. Summer crop regions are currently dry and sufficient and timely rainfall will be needed in the lead up to and during planting, it said.