Australia Raises Wheat Crop Outlook as Rain Defies El Nino

  • Rain in top producing states in winter boosts yield prospects
  • Canola, barley forecasts also raised after wet weather

Australia increased its wheat production estimate after El Nino-defying rain in winter boosted the outlook for yields in key growing regions.

Output may total 25.3 million metric tons in 2015-16 from 23.6 million tons forecast in June, the Australian Bureau of Agricultural & Resource Economics & Sciences said in a report. The crop was 23.7 million tons a year earlier. Farmers in the world’s fifth-biggest exporter begin harvesting about October.

Wheat in Chicago traded near a five-year low this month and is heading for a third straight annual loss as back-to-back bumper global harvests boosts supply. World inventories of grain, including wheat, are swelling to the highest in three decades, the International Grains Council predicted last month. While the El Nino is a risk, conditions tend to be mostly favorable across key Australian crop areas, according to Rabobank International.

“New South Wales had very good seasonal conditions over winter and in other states, South Australia and Western Australia in particular, there was late winter rain that came just at the right time,” Peter Collins, manager for agricultural commodities at Canberra-based Abares, said by phone. “In spring, that’s when it’s a critical period for yields.”

Wheat for December delivery climbed as much as 1.9 percent to $4.7675 a bushel on the Chicago Board of Trade and was at $4.75 by 12:41 p.m. in Sydney. Futures touched $4.63 this month after dropping to $4.6075 on May 5, the lowest since 2010, and have slumped 20 percent this year.

El Nino

Farmers in New South Wales, the second-biggest wheat grower, may harvest 7.2 million tons from 6.2 million tons forecast in June, Abares said. Western Australia’s harvest, the country’s biggest, may total 9.5 million tons from 9.3 million tons estimated in June, according to Abares. Parts of the state’s central wheat-belt registered the wettest July day on record at the end of the month,  according to the Bureau of Meteorology.

The El Nino in the Pacific Ocean is now the strongest since the record 1997-98 event, Australia’s weather bureau said Sept. 1. Most climate models indicate the Pacific will continue to warm, it said. While the El Nino is often associated with a drier winter and spring in eastern Australia, its strength doesn’t always determine its impact, according to the bureau.

World wheat production is set to climb to a record 726.5 million tons in 2015-16, boosting inventories to the highest ever, the U.S. Department of Agriculture predicts. The agency forecasts Australia’s wheat crop at 26 million tons.

Canola production in the world’s second-biggest exporter will probably be 3.1 million tons from 2.96 million tons predicted in June. Barley output may total 8.6 million tons from 8.2 million tons estimated in June, the bureau said.

Australia’s cotton production may reach 470,000 tons in 2015-16 from 450,000 tons a year earlier, Abares estimated. The bureau forecast output at 520,000 tons in June.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE