SYDNEY (Reuters) — Australia has trimmed its wheat crop forecast for this year by more than three percent after dry weather across key growing states.
However, output from the world’s second largest exporter is still expected to be its sixth largest on record.
The Australian Bureau of Agriculture and Resource Economics and Sciences pegged wheat production at 24.467 million tonnes in early September, down from its previous forecast of 25.399 million tonnes in June.
However, market participants had widely expected a downward revision, and it is unlikely to ease fears that the size of the Australian crop will pressure global wheat prices in the long term.
However, it could offer shorter-term support.
“A downgrade of nearly one 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 off a crop size of between 24 to 25 million tonnes,” said Luke Mathews, a commodities strategist at the Commonwealth Bank of Australia.
Chicago Board of Trade wheat futures have fallen more than 18 percent this year because producing nations, particularly in the Black Sea region, expect bumper crops.
Dry weather in eastern Australia, which produces the country’s premier wheat, has hit crop yields, ABARES said.
Production in New South Wales and Queensland is expected to total 8.98 million tonnes, a fall of 4.5 percent from ABARES’ previous estimate for the two states of 9.4 million tonnes.
Much of northern New South Wales and Queensland have received less than 20 percent of typical rainfall during August, according to data from the Australian Bureau of Meteorology.
ABARES also lowered its production estimate for Western Australia to 7.33 million tonnes from 8.807 million tonnes. Analysts said it reflected mixed weather conditions across the state.
However, an increase in production from South Australia offset the projected falls in Australia’s largest wheat producing states. ABARES said South Australian wheat production will top 5.2 million tonnes, up 27.5 percent from the forecaster’s last estimate of 4.11 million tonnes.
ABARES predicted that Australian canola production in 2013-14 would rise to 3.31 million tonnes. It had previously forecast 3.23 million tonnes.
Australian cotton production was seen at 990,000 tonnes, down from ABARES’ June forecast of 995,000 tonnes.