Clouds Hover Over Australian Wheat Output

(Bloomberg) -- Much anticipated rain in parts of Western Australia has failed to dispel the clouds hanging over Australia’s 2020 wheat production outlook.

Planting has started in many areas, with forecasters tipping a bumper crop after years of drought, following widespread early rain in some east coast regions. Still, while rain in southwestern Western Australia, the top exporting state, improved moisture for germination, dryness and stress remain extensive across the northwestern and southeastern growing belts of the state, and in Queensland, forecaster Maxar said.

Rainfall was below average for cropping areas of Western Australia and Queensland in April, while little-to-no rain is expected for either state this week, according to government forecaster Abares.

“Western Australia’s south‑west corner has got useful rain for winter crops, but the rest of wheat is still waiting even as the crop‑timing clock ticks a little louder,” Tobin Gorey, Commonwealth Bank of Australia’s agricultural commodities strategist, said in an email.

Rains Needed

The “time for concern is getting closer,” Gorey said, in a response to questions. “Once the end of May is on the forecast horizon, and the forecasts still suggest no rain, then worries are likely to affect prices.”

The Australian outlook is being watched closely amid concern about the impact that dryness in other global growing regions, including parts of the U.S. and Europe, could have on prices, as well as in the light of protectionist measures put in place by some countries amid the coronavirus pandemic.

About 40-50% of the winter crop has been in sown in Western Australia, amid “hit and miss” rainfall, said the state’s grain industry association. If more widespread rain is received by the end of May, the state could manage at least average output this year, it said in a report released Friday.

Rabobank also pointed to dryness as a concern in parts of the country. “Large parts of Western Australia remain dry and without near-term rainfall prospects, and Queensland cropping regions have favorable sub-soil moisture, but are in need of rain to enable planting,” Cheryl Kalisch Gordon, senior grains and oilseeds analyst, said in an emailed report.

However, the bank lowered its price expectations for crops, given more positive global production prospects and the end of Covid-19 panic buying by consumers. It lowered its outlook range for Chicago wheat for the coming 12 months by 6% from last month to $5.25-$5.34 per bushel.

Forecast Kept

Meanwhile, Sydney-based adviser and broker IKON Commodities is less concerned about the rain outlook and is maintaining its forecast for a bumper 2020-21 crop of 28.53 million tons, almost double the previous year.

There are worries about dryness in Queensland, but there are still four to eight weeks for it to rain in that state, said Ole Houe, director at IKON. The state is also only responsible for about 10% of the country’s output, he added.

Hopes are being buoyed by substantial rains in New South Wales, the second-biggest producing state, which may plant a record area this year.

“We feel that the crop prospects are very optimistic to date,” Houe said. “There is naturally a lot that could change prior to harvest. However at the moment we think it is just as likely we will see a crop above 30 million tons as we will see one below 25 million tons.”

The USDA’s Foreign Agricultural Service said Australian wheat production in the 12 months from October, the crop currently being planted, may surge to 23 million tons from 15.2 million a year earlier.

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