Australia’s record harvest bad news for wheat prices

SYDNEY, Australia (Reuters) — Australia has raised its wheat harvest forecast by more than 16 percent from the September estimate as near ideal conditions across much of the world’s No. 4 exporter push output to record levels.

Wheat output in the 2016-17 season will total 32.64 million tonnes, the Australian Bureau of Agricultural and Resource Economics and Sciences said, up from a forecast in September for 28.08 million tonnes.

ABARES said canola production will total 3.58 million tonnes, down from its September estimate of 3.63 million tonnes as heavy east coast rain damaged the earlier maturing canola crop.

With harvesting underway, 2016-17 is shaping up as Australia’s biggest wheat crop ever, surpassing the record set in 2011-12 at 29.6 million tonnes.

A large Australian wheat crop, in a global market already flush with supplies following bumper output in the Northern Hemisphere, could further drag on global benchmark prices for the grain and ensure cheap food supplies for Asian buyers.

U.S. wheat prices continue to linger near a 10-year low reached at the end of August as global supplies this season look set to hit record levels.

Heavy rain across Australia’s east coast in recent months will drive much of the record national production, ABARES said.

Australia’s east coast had three years of below average output following sustained dry weather.

Last season, the strongest El Nino in nearly 20 years fuelled dry weather in the region and crimped production.

The region has seen nearly twice the average rainfall between June 1 and Nov. 30, according to official weather data. New South Wales will become the largest producer of wheat, ABARES said, with output totalling 10.5 million tonnes.

The all-time high crop comes despite frost limiting production in Western Australia, typically the country’s largest producing region. ABARES said Western Australian wheat production will total 9.5 million tonnes.

Higher east coast production is a boost for GrainCorp Ltd., the region’s bulk grain handler.

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