With major parts of New South Wales state still dry and waiting to plant wheat, forecast rain for the drought-hit central-western area next week could mean a difference of 5 million tonnes or more in Australia's crop.
If the rain fails to arrive, it could see local wheat futures pop back up, after losing 15 percent in the last 10 days on hopes the country's drought would be broken, and could also help lift international wheat prices, traders said. "Another failure of the Australian grain crop would have a fairly substantial impact on world wheat prices," Garry Booth of commodities broker MF Global said on Friday.
January wheat futures on the Australian Stock Exchange fell to A$307 a tonne on Thursday from A$360 on May 28 after rain fell in northern New South Wales and more was forecast for dry central parts of the state next week. "The Australian grain market is highly focused each day on the upcoming weather events, and reacts sharply to any change in the outlook," Booth said.
Another trader from a large grains group, who asked not to be named, said that Australian wheat futures had fallen from a premium of A$55 a tonne to Chicago last week to a discount of A$10-A$20 a tonne. "If the rain fails to arrive our price will pop up again pretty fast. If the rain comes as planned we will trace along for a while," the trader said.
"The weather would have to deliver all of the benefits of heavy rain to maintain prices around these levels," Booth said. "If there's any failure on any of the rain events, then they will have sharp upside." Global grain markets had retreated because of the prospect of large crops in major growers including Australia. Traders pointed out that some wheat could still be planted in Australia in up to five weeks' time, but yields begin to fall.
If rain did not fall soon in central and southern New South Wales, the national wheat crop could shrink to 17 million tonnes, one top trader in a large grains organisation said. This group is presently forecasting a national wheat crop of 23-24 million tonnes, with the potential for 25 million tonnes, in line with other forecasters.
"If we don't get rain in the next week we'll pull it back towards 20 (million tonnes)," the trader said. "If it does rain and continues to rain we would put it around 24-25." Dutch-based global agri-business bank Rabobank recently cut its forecast of the Australian wheat crop to 20-24 million tonnes, from its first forecast of 23-26 million tonnes. Private group Australian Crop Forecasters is forecasting 26 million tonnes, down slightly from an early forecast of 27 million tonnes, and is considering whether to downgrade.
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