Australia poised to lower wheat forecast as El Nino curbs output
AUSTRALIA- Traders and analysts anticipate that Australia will probably revise its wheat production estimate for the 2023/24 season downward by approximately one million metric tons.
This reduction is attributed to the adverse impact of dry El Nino weather conditions on crop yields, exacerbating the strain on global wheat supplies due to poor harvests in competing exporting countries.
Australia, being the world’s second-largest wheat exporter, plays a pivotal role in supplying major buyers such as China, Indonesia, and Japan.
However, the increasing influence of the El Nino weather phenomenon implies a likelihood of more dry conditions following an unusually warm winter.
Ole Houe, from the agricultural brokerage firm IKON Commodities, commented on this situation, stating, “Compared to the previous year, the crop is expected to be more than 10 million tonnes smaller, constituting a significant loss.”
Market participants anticipate that the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) will make a downward adjustment of approximately one million tonnes from its June production forecast of 26.2 million tons during this week.
It’s important to note that this June forecast already marked a 34% decrease from the previous year.
This scenario unfolds against the backdrop of three years of record-breaking Australian harvests following abundant rainfall. Nevertheless, drought conditions are anticipated to cause a sharp decline in global wheat stockpiles among major exporting nations, reaching their lowest levels in over a decade, as indicated by a Reuters analysis.
Recent reports also highlight challenges in wheat production in other key exporting countries. Canada, the world’s fourth-largest wheat exporter, has projected lower output due to dry weather.
Adverse weather conditions are affecting crops in Argentina, while heavy rainfall has diminished wheat yields in China.
A trader based in Singapore, specializing in Australian wheat exports to Asian importers, stated, “The Australian crop is likely to fall below 25 million tons, particularly in regions like the east coast and some parts of Western Australia, where hot and dry conditions have prevailed.”
Wheat prices have already experienced a 25% decline this year, primarily due to ample supplies from Russia, the world’s leading wheat exporter, despite ongoing geopolitical tensions.
According to Houe, the situation is challenging, with the Canadian, Chinese, and possibly Indian crops all facing setbacks.
“The reduction in the Australian crop is certainly unwelcome,” he emphasized,
Regarding barley, ABARES’s June forecast estimated it at 9.9 million tonnes, a 30% decrease from the previous year.
However, it is less likely that ABARES will revise this figure downward significantly, as the Australian barley crop has been relatively less affected by hot and dry weather conditions.
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