Australia's wheat crop and exports for 2007/08 remained on a knife-edge on Monday after rain failed to arrive over the weekend to rescue crops. This sent Australian wheat futures to a record high of A$427 ($352.89) a tonne, up A$30 on the day.
The leap broke the last record of A$423, set last on Wednesday, as hopes faded that forecast rain would save the crop. Wheat futures on the Chicago Board of Trade hit a record high on Monday, boosted by renewed export demand. CBOT December wheat in electronic trade was up 22 cents at $8.65-per bushel, after hitting $8.71-3/4.
Prices have nearly doubled since April as commercial buyers scrambled to secure exports amid outlooks for dwindling world supplies. In Australia, forecasts of a 15 million tonne wheat crop last year could be optimistic, said futures broker Garry Booth of Man Financial. The country now faced the possibility that a 26 million tonne wheat crop first forecast for 2006/07 could be halved, he said.
International farm-trade specialist Rabobank on Monday cut its forecast size of Australia's wheat crop to between 15 million tonnes and 19 million tonnes, from its previous public forecast of 20 million tonnes a month ago.
The bank issued an internal forecast of 17 million tonnes a couple of weeks ago, a bank analyst told Reuters. With Australia the second-biggest wheat exporter in the world, the shrinking crop would crimp exports after exports from the drought-affected 2005/06 crop of 9.8 million tonnes had to be rationed, Booth said.
"The reality of a general Australian crop failure, except for the odd area, is definitely sinking in," Booth said. "The offshore markets have yet to really price that," he said. "Some of the pessimistic forecasts given by a few traders last week of a 15 million tonne crop may indeed prove to be optimistic rather than pessimistic," he said.
The USDA and most international traders have priced in a reasonable exportable surplus from Australia. If that disappeared or were sharply reduced, substantial rallies could be expected in offshore grain prices based on the growing Australian drought, he said.
Rabobank said the first two weeks of September would be critical. "Without rain, some regions will soon begin to sacrifice crops to grazing," it said. September would be the make-or-break month for the Australian wheat crop and regular rain could still produce an exportable surplus of Australian wheat, grains broker Rob Imbrue of rural services group Farmarco said.
But Australia's main wheat exporter AWB Ltd said it was still "waiting on the crop". All wheat from the last harvest was priced, shipped, allocated or sold, spokesman Peter McBride said on Monday. AWB, which remains monopoly exporter for the current wheat crop but will lose this status next year, has already rationed supplies from the 2006/07 crop among its major existing markets in Asia and the Middle East.
AWB has not made a forecast for the present crop. The official government forecaster the Australian Bureau of Agricultural and Resource Economics is due to update its forecast on September 18.
The trade as dated by the recurrence of drought regards its existing forecast of 22.5 million tonnes. "It's all going to depend on spring rains," AWB's McBride said of the current crop. "We're just waiting to see." Some rain is forecast for the next few days, but Australian grain analysts on Monday said they would not speculate on prospects for rainfall.