Australia's wheat production is likely to decline by more than one million tonnes from the government's most recent estimate, and fall 27 percent from last year's record crop, a Reuters poll shows, as dry weather reduces yields. Australia is the world's second largest wheat exporter, and worries about its 2012/13 crop are raising fears about global food supplies and supporting benchmark US wheat futures, which are up 42 percent since the beginning of June.
Reuters surveyed 10 analysts and traders, and their average estimate for the wheat crop came in at 21.44 million tonnes, a fall of nearly 5 percent from Australia's official forecast of 22.5 million tonnes and eight million tonnes below last year's all-time high output of 29.5 million tonnes.
"A dry August and September have taken a lot of potential off yields, making it hard for Australia to have an above average crop," said Malcolm Bartholomaeus, analyst at industry newsletter Profarmer. A lower Australian wheat crop would reduce global supplies, which may tighten further if Russia, typically the world's fourth largest exporter, curbs exports due to dry weather earlier this year. US wheat has also been affected by a drought that ravaged corn and soybean crops across the US grain belt. Investment bank Goldman Sachs said on Monday it expected corn and wheat prices to outperform soybean prices over the next few months due to bigger-than-expected US soybean supplies reported by the government last week.
The bank increased its three-month wheat price forecast to $10.25 from $9.80, and its six-month forecast to $9.50 from $8.75. The median forecast for the Australian wheat crop pegs production at 21.59 million tonnes, with estimates ranging from a low of 20 million tonnes to a high of 23 million tonnes. The dry weather across Australia has damaged yields, especially in Western Australia, the nation's largest wheat producing state.
"The crop had a huge potential two week ago but the rains that were supposed to come last weekend were disappointing, especially for Victoria and New South Wales," said Stefan Meyer, a manager for cash markets at brokerage INTL FCStone in Sydney.
Western Australia produces at least a third of Australia's total wheat crop. Analysts had estimated its wheat output to range between 5.5 million tonnes and 6.9 million tonnes this year, much lower than last year's record crop of 11.73 million tonnes, and also below the 7.1 million tonnes forecast made by the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) in early September. Some showers are forecast over the wheat growing region, which would boost late planted crops. But many analysts expect the crop to fall to around 20 million tonnes.