Australian wheat crop shrinks

A renewed bout of dry weather during Australia's critical growing period is shrivelling the size of the winter wheat crop with latest forecasts heading toward 20 million tonnes, industry analysts and forecasters said on Thursday.
In some parts of the eastern wheat belt, disappointed farmers are turning cattle and sheep into wheat fields to consume the remains of dead and dying crops. "We're on a knife edge," said John Ridley, chairman of the grains committee in the New South Wales Farmers Association. "If it doesn't rain in the next week to 10 days the crops will slip dramatically."
Agricultural analyst Programmer on Thursday told Reuters it had cut its forecast for the wheat crop to 20.9 million tonnes from its previous forecast of 22 million tonnes.
This is now well short of the United States Department of Agriculture forecast of 23 million tonnes a key factor in the Chicago wheat futures market as prices surge to 11-year highs because of problems in northern crops.
"The world market is banking on Australia having something like a 22 million tonne crop. Any downside to that would be very supportive to the market," Ron Storey, principal of private group Australian Crop Forecasters, said.
Tight global wheat supplies are rattling world markets, with heavy rain across Britain and northern France this week raising fears of further losses in Northern Hemisphere crops. This has left the Chicago market hanging on the size of the Australian crop this year. "Any downside to that will create a market bias on the upside," Storey said.
ACF is still forecasting an Australian wheat crop of 23.7 million tonnes but sees ongoing shrinkage in crop size. Storey said on Thursday he not believes the crop has dipped to 20 million tonnes yet. Farmers on Thursday were hoping that light to moderate rain, which began to fall in central northern parts of New South, Wales State would improve prospects for the crop.
"But one thing for certain is that there already has been a reduction in potential yields," Ridley said, adding that in his view the national wheat crop was already less than 22 million tonnes. Monopoly bulk wheat exporter AWB Ltd has not forecast the size of the crop but follow-up rains, especially in spring in August and September, would be critical, spokesman Peter McBride said.
Talk of a 20 million tonnes wheat crop was still "speculation at this time", he said. Meanwhile, Storey, a former manager of AWB export pool, said that international wheat buyers were not balking at buying at present high prices because of lack of stocks.
"Ultimately we will definitely get some rationing of demand we'll start to see a dropping off in demand, for sure," he said. AWB said it was "talking with customers" but it was season to begin to negotiate prices with buyers, McBride said. The vast majority of AWB's wheat from the last harvest had been allocated and priced and the group was waiting for the next harvest to come in, he said.