Canadian wheat growers could face an almost forgotten competitor in 2008.
Australia hasn’t had a sizable export program since the 2005-06 crop year due to back-to-back droughts.
That year, the country’s growers harvested 25 million tonnes of wheat and exported 16 million tonnes. In the following two years, the harvest and export programs have averaged about half of those amounts.
Analysts forecast a return to more normal production in 2008-09 due to favourable moisture conditions heading into Australia’s winter crop season.
La Nina delivered substantial rainfall in Australia’s eastern agricultural zones in late 2007 and early 2008, boosting summer production of sorghum, cotton and rice by about 40 percent, according to the Australian Bureau of Agricultural and Resource Economics.
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The yield estimates for wheat and soybeans were neutral to bullish, but these were largely a sideshow when compared with corn.
The weather has also raised optimism for the coming winter crops of wheat, barley and canola, which are seeded in April-May through June-July.
“Those with winter cropping programs are likely to enter autumn with much better soil moisture levels than was the case 12 months earlier,” said Bill Cordingley, head of food and agribusiness research at Rabobank Australia & New Zealand.
A report prepared by the organization predicts a rebound in production.
“If the positive La Nina climatic cycle continues to emerge and the rains come, 2008 could be a year to remember for Australian agriculture,” said the report.
Rabobank forecasts a winter wheat crop of 23 to 26 million tonnes. The International Grains Council also predicts a return to more normal output, forecasting 22.5 million tonnes, up 77 percent from a year earlier.
Bruce Burnett, director of weather and crop surveillance with the Canadian Wheat Board, said a crop of that size could hurt Canadian wheat prices.
“One of the drivers of the high prices here over the past couple of years has been the Australian drought. It has decreased southern hemisphere production significantly and that lessens the competition,” he said.
If Australia is back in the market, that means more competition for the CWB in Japan, Indonesia, India and the Middle East.
But that is still a big “if” in Burnett’s estimation.
A lot can happen between now and April. Australia is in the middle of its summer and the moisture that is around could evaporate come fall. And while eastern Australia has received good rain, southern and western Australia are still mostly dry.
Burnett recalled that around this time last year analysts thought the world was entering a La Nina event and that Australian farmers would plant into good moisture, but they ended up mired in another drought.
Even if Australia harvests a good crop, he wouldn’t expect an immediate return to a 16 to 18 million tonne export program because it will need to rebuild depleted reserves.
He said the impact on global wheat prices will largely depend on what happens with winter wheat crops in the United States, Europe, Russia and the Ukraine, which all come off before Australia harvests its crop.
“I would hesitate to say it would be extreme pressure because wheat stocks are very tight this year. I wouldn’t say this one factor would halve the price of wheat or anything like that.”
Burnett said his comments about Australia’s wheat crop largely apply to its barley crop as well, but he noted that Australia has traditionally been a bigger player in barley export markets, so a big crop might have a more dramatic impact on prices.
“It is probably one of the key factors in the upcoming barley marketing year,” he said.
