Dry weather in Australia’s biggest producing states has harmed crops and curbed supplies for export, reducing the country’s output by 3% production forecast.
The Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES) reported today that farmers are set to harvest 24.467 million tonnes of wheat in 2013-2014, down from its previous forecast of 25.399 million tonnes in June and 22.1 million tons last year.
The cut had been widely expected but market participants still fear pressure in global prices for grain in the long term. Macquarie Group Ltd said in a Bloomberg report that a smaller Australian crop is “a major risk for the world” and fewer exports may help push prices higher.
“A downgrade of nearly 1 million tonnes from Australia, which is one of the world’s largest exporters, is likely supportive of global prices but we don’t know if it will move the dial too significantly as the market was largely working of a crop size of between 24-25 million tonnes,” said Luke Mathews, commodities strategist at the Commonwealth Bank of Australia quoted in a report on Reuters.
ABARES said Western Australian growers will collect 7.3 million tonnes in 2013-2014 compared with 8.8 million tons forecast in June but it will still put the state ahead of last year’s top producer New South Wales, which will harvest 7.2 million tonnes from the 7.6 million tonnes forecast.
The increase in production from South Australia, however, was able to offset the projected falls in Australia’s New South Wales, Queensland and Western Australia. ABARES said South Australian wheat production will top 5.2 million tonnes, up 27.5 % from the forecaster’s last estimate of 4.11 million tonnes.
Increases in other crop outputs are also forecast with canola up by 0.1 million tonnes and barley, 0.3 million tonnes from their June projections.