Australia cuts wheat crop forecast

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Peter Smith, FT Syndication Service
SYDNEY: The Australian government last Tuesday further reduced its forecast for this year's wheat production as a lack of rain and above-average temperatures inflict more damage on the country's hard-hit farmers.
Australia's wheat crop is now forecast to produce 12.1m tonnes, down from 15.5m tonnes expected last month and nearly half the 22.5m tonnes that was projected in June.
The price of wheat hit a record of $9.6175 a bushel in late September as bad weather damaged crops in Europe, Canada and Australia. Wheat stocks are already near their lowest since 1979, according to the International Grain Council, an intergovernmental body.
Tobin Gorey, commodities strategist at the Commonwealth Bank in Melbourne, said the revised figures for Australian wheat had not come as a surprise given the weather conditions. He said some investors may have factored in an even larger fall.
The wheat price last Tuesday retreated 18 cents to $8.10 a bushel.
Amelia Brown, a commodities analyst at the Australian Bureau of Agricultural and Resource Economics (Abare), noted that since September there had been little "worthwhile rain" in major wheat growing areas of New South Wales, Victoria and South Australia.
"That period is critical to [crop] yields and combined with above average temperatures that has placed a lot of pressure on crops," she said.
The cut in the overall forecast masks regional variations across Australia. There was a small increase in forecast wheat output for Queensland, while New South Wales' production has been more than halved compared to last month with many crops failing or cut for livestock feed.
"NSW has been particularly dry, with many regions recording their lowest September-October rainfall on record," Abare said
However, Ms Brown said there was little risk of further revisions because most Australian farmers had already begun to harvest available crops.
Abare said this year's combined production of wheat, barley and canola is now likely to be just over 18m tonnes, down from 22.5m tonnes last month and 33m tonnes expected in June.
Australia's wheat production fell to 9.8m tonnes last year, one of the worst crops on record. It typically averages about 25m tonnes.
Wheat prices have risen sharply this year on a combination of reduced supply and strong demand from developing countries such as China and India. Consumers are demanding more meat and poultry, forcing up cereal demand for livestock.