Australia trims 2104-15 wheat crop forecast as El Nino looms

SYDNEY (Reuters) — Australia lowered its forecast for 2014-15 wheat production by nearly one percent on Wednesday as dry weather curbs yields, and warned output could fall further if an El Nino weather pattern forms.

The world’s third-largest wheat exporter is expected to produce 24.59 million tonnes in the current season, down from a March estimate of 24.80 million tonnes, the country’s official agricultural forecaster said.

The crop would still be the seventh largest on record following last year’s bumper 27.01 million tonnes, but the Australian Bureau of Agriculture and Resource Economics and Sciences cautioned that dry weather could cut yields.

“Sufficient and timely rainfall over winter will be critical to the development of winter crops, particularly in those areas where soil moisture levels are presently low,” the bureau said.

“Yields are likely to be lower than currently assumed if sufficient and timely rainfall is not received.”

The forecast decline in the wheat crop comes even as the acreage devoted to the grain is expected to rise to a three-year high of 13.84 million hectares.

Strong Australian production will add to pressure on benchmark wheat prices, which have tumbled nearly 15 percent over the past five weeks as fears over global production have eased with favourable weather in the United States and an easing of tensions in Ukraine.

ABARES cautioned that the impact of an El Nino, seen by most global forecasters as increasingly likely to arrive over the next few months, would be difficult to predict.

The El Nino — a warming of sea-surface temperatures in the Pacific — can trigger drought in Southeast Asia and Australia, as well as floods in South America, hitting production of key commodities such as rice, wheat and sugar.

The U.S. Climate Prediction Center this month gave its strongest forecast yet that El Nino will strike during the Northern Hemisphere summer, pegging the likelihood at 70 percent in its monthly outlook on June 6.

The worst El Nino on record in 1997-98 was blamed for massive flooding along China’s Yangtze river that killed more than 1,500 people.

ABARES forecast Australian canola production during the 2014-15 season at 3.471 million tonnes, up from its previous estimate of 2.948 million tonnes.

The rise comes as farmers have increased acreage devoted to the oilseed at the expense of other winter crops.

The bureau also revised down its estimate of 2013-14 cotton production to 910,000 tonnes, having previously pegged output at 940,000 tonnes.

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