Australian Southeast Seen Drier as El Nino Predicted for Harvest

Wheat-growing regions in southeast Australia, the world’s fourth-biggest shipper, are set for a drier three months as investors weigh whether a looming El Nino will miss the key growing period.

The chance of below-median rainfall between August and October is more than 60 percent in southern New South Wales, most of Victoria and South Australia’s far southeast, the Bureau of Meteorology said today. Most of Queensland has an equal chance of a wetter or drier three months, with below-median rain predicted for the state’s northeast, it said.

Australia stays on El Nino alert and the weather bureau forecasts the event for spring, which begins in September, it said July 15. While the government predicts a lower wheat crop this year amid an outlook for drier weather, an El Nino may not develop until farmers are preparing to harvest. Futures in Chicago tumbled 19 percent in the past year on expectations global reserves will climb to a three-year high.

“The impact of reduced rainfall would be too late and not severe enough to make any significant dent to the overall production” after substantial rain during planting, Sam Sloane, senior analyst risk management and advisory at Ikon Commodities Pty., wrote in an e-mail. “There are still major concerns over the state of the Queensland crop, with recent reports suggesting that much damage has already been done.”

The weather bureau had predicted in May that an El Nino could develop as early as July, when wheat is still growing. Farmers begin harvesting crops in spring. Wheat output may total 24.6 million metric tons in 2014-2015, down from a March estimate of 24.8 million tons and compared with 27 million tons a year earlier, the Australian Bureau of Agricultural and Resource Economics and Sciences said June 11.

Australia’s bureau joins forecasters from the U.S. to the United Nations in warning an El Nino may happen this year. The odds of an event in the Northern Hemisphere summer are about 70 percent, the U.S. Climate Prediction Center says. Indonesia’s Meteorology, Climatology and Geophysics Agency said July 18 that it expects an El Nino to develop from August. Australia predicts that the event is unlikely to be a strong one.

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