Australian wheat output seen shrivelling to 10-year low on dry weather

Australia's wheat production is likely to fall to its lowest since 2007/08 amid persistent dry weather, missing official forecasts made earlier this month as well as the US Department of Agriculture's latest estimate, a Reuters poll showed. The median of estimates from 10 analysts, brokers, traders and banks showed output is expected to drop to 20.15 million tonnes, 7 percent below the official outlook of 21.64 million tonnes and more than 40 percent lower than last year's all-time high of 35.56 million tonnes.
The steep decline in Australian wheat output is expected to sustain demand from the Black Sea region and the United States, underpinning prices. Chicago wheat prices have risen almost 5 percent this month, though on a quarterly basis the market is suffering its worst losses in two years on abundant global inventories.
"It is spring time in Australia and temperatures have been really high," said Adam Davis, head of commodities at Merricks Capital in Melbourne. "For a crop that doesn't have much soil moisture, there is going to be significant downgrade in production."
Davis, one of the contributors of the poll, forecast the country's wheat production at 18.5 million tonnes, the lowest prediction among market watchers polled by Reuters.
Many of Australia's wheat-producing regions received less than half of average rainfall between June 1 and August 31, official data showed.
Winter 2017 was not only the warmest in Australia since records began more than a century ago, but was also among the top 10 driest seasons ever, data from the country's weather bureau showed.
Frost also plagued the country's east coast which produces high-protein wheat. It will add to the global shortfall in high-quality wheat supplies after dry weather in the United States crimped spring crops.
"It has been so dry across the east coast that yields will fall significantly across Queensland and New South Wales," said Andrew Woodhouse, grains analyst at Advance Trading Australasia.
Australian wheat prices have already risen above offers being made for US cargoes in Asia, a rare occurrence that is expected to drive more purchases from North America.
Still, globally there is no shortfall in wheat supplies, with International Grains Council (IGC) lifting its estimates this week.
The inter-governmental body, in a monthly report published on Thursday, put total grains production at 2.069 billion tonnes, up 19 million tonnes from its previous forecast and now only trailing last season's record of 2.133 billion tonnes.