Australian wheat crop almost out of woods

Australia’s wheat crop, initially forecast to be near its biggest ever, is nearly out of the woods after a series of downgrades due to poor rains and recent hot weather, removing one element of uncertainty for global markets.

At an estimated 20 million tonnes, the 2008-09 wheat crop will still rank among the best in recent years, but far off the 26 million tonnes predicted in the spring, when a surge in prices drove farmers to sow their second-biggest crop ever in hopes for a revenue boom after drought crippled output the previous two years.

Some analysts warn a few risks remain, especially if hot weather persists in smaller southeastern grain-growing regions, as private consultancy Australian Crop Forecasters expects.

“With further reports of crops not going to make it to harvest, and the cutting of crops for hay moving progressively south, our revised forecast puts the estimated crop production of both Victoria and South Australia now below that of last year,” ACF said after cutting its full-year nationwide crop view by 2.5 per cent to 19 million tonnes.

But it said harvesting was continuing in the states of Western Australia and Queensland, where about half of the country’s crop is grown, and other analysts said supplies there should live up to high expectations, despite recent frost.

That crop should be harvested by mid-December.

“With the size of the northern New South Wales crop and particularly the Western Australian crop, despite the frost they had, we will be comfortable that the number can hang on above 20 million tonnes despite how bad it is in South Australia and Victoria,” said Tim Glass, global head of commodities at National Australia Bank Ltd.

Good rains in Western Australia, Australia’s top exporting state, have boosted harvest prospects there, though some crops had been damaged by late frosts.

ACF lifted its estimate of Western Australia’s production to 7.9 million tonnes from 7.8 million tonnes a week earlier and kept its estimate for the state of New South Wales, the second-largest exporting state, at 6.5 million tonnes.

Australia is one of the world’s three largest exporters, and a slump in the crop over the past few years to below 13 million tonnes was one of the main triggers for wheat’s year-long surge to a record high above $13 a bushel in February.

“It looks like it will be around 19 million to 20 million tonnes, with some estimates up around the 21-million-tonne mark, so there will be a fairly sizable amount to export,” said Peter Jones, general manager at marketing grain handler and marketer ABB Grains Ltd., estimated exports of about 14 million tonnes.

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