Australia set for another year of bumper grains harvests

Australia is on track for another year of bumper grains and oilseed harvests, the government's chief agricultural forecaster said on Tuesday, which could boost exports and weaken prices. Australia is expected to produce an above-average crop after two straight years of record output, even though farmers will reduce wheat plantings in the year to the end of June 2013 due to lower prices, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) said.
Australia is the world's fourth-largest wheat exporter. "It is already clear at the outset that seasonal conditions so far in 2012 should help set our agriculture sector on track for another strong year," Australian Agriculture Minister Joe Ludwig said at an ABARES conference.
"For the first time in more than 30 years, the survey data shows both strong average farm business profits and positive rates of return for broad acre farms in all states and all broad acre industries." Australia's wheat output is expected to drop 13 percent in to 2012/13 from all-time high production of 29.5 million tonnes, ABARES said in their latest forecasts, released on Tuesday.
Canola output during the year is expected to rise 5 percent to 2.9 million tonnes and the cotton harvest will increase to a near record of around 1.1 million tonnes. Planting conditions in Australia, typically the world's third-largest sugar exporter and No 4 cotton supplier, are favourable ahead of sowing, thanks to widespread late summer rains, Paul Morris, ABARES executive director said.
US wheat futures are little changed so far in March, after finishing lower last month due to plentiful supplies. Last year, prices fell by around a fifth. But US live cattle futures posted an all-time high last week on fund buying that was prompted, in part, by hopes for stronger cash cattle prices due to drought-reduced supplies.
"We are seeing areas likely to come down simply for the relative returns for canola and barley compared to wheat," Morris said. "We are also seeing some movement back into sheep as well. World prices are pretty high at the moment and so are meat prices, so that is a bit of incentive to move back into livestock as well," he added. According to a Reuters poll, Australia's wheat output is likely to drop more than 15 percent in 2012/13 from a bumper crop this year as lower global prices may prompt farmers to shift to other crops such as canola and barley.