Australia Wheat Crop Cut as El Nino Brings Hot, Dry Weather

  • Outlook lowered for Western Australia after below-average rain
  • El Nino expected to be among three strongest since 1950

Australia cut its wheat harvest estimate 5.1 percent after dry and hot weather linked to El Nino curbed yields in the world’s fifth-biggest exporter.

Output may total 24 million metric tons in 2015-16 from 25.3 million tons forecast in September, the Australian Bureau of Agricultural & Resource Economics & Sciences said in a report on Tuesday. That compares with 23.7 million tons a year earlier. Winter-crop harvesting is largely complete across Queensland and is progressing in other states.

Futures in Chicago dropped 19 percent this year amid expectations global inventories will climb to a record. World supply can compensate for a somewhat poorer Australian crop if necessary, according to Commerzbank AG. This year’s El Nino, which brings drier spring weather to eastern Australia, will probably rank among the three strongest since 1950, the World Meteorological Organization says. Australian farmers also had to contend with rain and wind in November and recent bushfires in parts of the country’s west and south.

“Prospects for Australian winter crop production in 2015–16 weakened during spring,” Canberra-based Abares said in the report. “Rainfall was below average in many cropping regions during September and early October and daytime temperatures were significantly above average in southern Australia during early October.”

Wheat for March delivery on the Chicago Board of Trade rose 0.3 percent to $4.77 a bushel at 12:07 p.m. in Singapore. Futures are heading for a third straight annual decline, the longest slump since 1999.

Western Australia

Western Australia’s wheat crop, the country’s biggest, may total 8.7 million tons compared with 9.5 million tons estimated in September, Abares said. Grain quality has been variable, while fire damage in November reduced production prospects in the Esperance region, it said. Farmers in New South Wales, the second-biggest producer, will harvest 7.1 million tons versus 7.2 million tons.

Western Australia and New South Wales had their hottest-ever October, while rainfall was the lowest on record for an area spanning the southwest of Victoria and southeastern South Australia, according to the Bureau of Meteorology. El Nino this year is comparable to the record events of 1997-98 and 1982-83, according to the weather bureau.

World wheat production is set to reach a record 732.98 million tons in 2015-16, pushing global reserves to an all-time high, according to the U.S. Department of Agriculture. The agency in November forecast Australia’s wheat production at 26 million tons, down from 27 million tons estimated in October.

Australia’s canola production will probably be 3 million tons, compared with 3.1 million tons predicted in September, according to Abares. Barley output may total 8.2 million tons versus 8.6 million tons, the bureau said. Australia’s cotton production may reach 560,000 tons in 2015-16, it said.

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