Wheat Exports From Australia Seen Missing Government Forecast on Harvest
Wheat exports from Australia, set to be the world’s second-biggest supplier, are likely to miss a government forecast as production will be less than predicted, said two of the country’s banks.
Shipments may be 19 million to 19.5 million metric tons, said Paul Deane, an economist at Australia & New Zealand Banking Group Ltd. That’s about 1 million tons below an estimate for a record 20.4 million tons in the year starting Oct. 1 from the Australian Bureau of Agricultural and Resource Economics and Sciences. Cargoes totaled 18.7 million tons this year.
While exports may trail the official estimate, they would boost supplies and potentially pressure prices. Wheat has tumbled 12 percent this month in Chicago on better harvests in the former Soviet bloc and Canada. Global stockpiles may be 194.59 million tons by May 31, 3 percent more than expected in August, the U.S. Department of Agriculture said. Australia estimates its harvest at a near-record 26.2 million tons.
“It’s possible, it’s just not very probable in our eyes,” said Luke Mathews, a strategist at Commonwealth Bank of Australia, who maintained a production forecast of 23.5 million tons. “We’re going to have a smaller crop; that will obviously flow through to smaller end-use, of which exports is one source. We believe exports will be well below the 20.4 million tons.”
Wheat for December delivery declined 0.6 percent to $7.005 a bushel on the Chicago Board of Trade today and the most active contract has dropped 3.6 percent in the past year.
The Abares forecast is about 2 million tons more than the median estimate of 18 million tons in a Bloomberg survey of eight analysts and traders last month and about 3 million tons more than predicted by the USDA.
“To get a 26 million number, at this point everything is going to have to go really right,” said Deane from ANZ in an interview in Melbourne yesterday. “Even the short-term outlook I don’t think is particularly great, the next 7 to 10 days, for rain. It doesn’t give me a lot of confidence that we’re going to have a 26 million ton number” for the harvest, he said.
No rainfall is forecast for New South Wales, set to be the second-biggest grower, in the four days to Sept. 18, according to a weather model on the Bureau of Meteorology website. The state had below-average rainfall in July and the Murray-Darling Basin which extends from southern Queensland to South Australia, had the driest June since 1986, it said.
Dry weather in July and August on the east coast spurred concerns the nation may rely on a bumper crop in Western Australia, set to be the biggest producer, to boost the harvest.
Analysts at ANZ, National Australia Bank Ltd. and Commonwealth Bank of Australia all cut their harvest predictions in August, citing dry conditions on the east coast. ANZ lowered its forecast again this month.
“You have Western Australia pretty much producing twice as much as they did last year,” Henry To, a research economist at Abares, said in an interview yesterday. In South Australia, Victoria and central New South Wales “there were some periods in June and July where it looked a bit dry but they did get good August rainfall and that’s really helped crops along,” he said.
Wheat production in Western Australia may jump 89 percent to 8.65 million tons this season, the Grain Industry Association of Western Australia said yesterday, increasing its estimate made last month. That compares with 9 million tons forecast by the government this week. Drought in 2010 cut the state’s grain crop by about half.
“We’re going to get a rebound in Western Australia, there’s no question,” said Deane. “I expect east coast and South Australia exports might be down a touch year-on-year, an increase in Western Australia. Net, we might get a 1 million ton increase in exports year-on-year.”
Increasing world supplies may pressure prices. Production may jump 33 percent from a year earlier in a 12-country bloc of former Soviet countries after drought hurt crops last season, according to the USDA. Canada’s output was pegged 3.6 percent higher than last year, when floods swamped fields.
“While a big export program out of Australia, out of Ukraine and Russia are negative for prices, wheat can only fall so far in this environment against corn,” said Deane, who predicts wheat prices will average $7.10 a bushel in the three months to Dec. 31. Prices will keep trading near parity to corn, Goldman Sachs Group Inc said in a report dated Sept. 12.
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