Feed grain users in Australia are worried that unless crops get rain in the next week or two, they will have to start importing feed.
This is an exceptional admission from a country that is one of the world’s leading grain exporters.
It also signals that world wheat and barley prices could rise again. Recently, wheat price trends have been down due to North American harvest pressure.
Drought has stalked Australia for five years and only perfectly timed rain allowed production of a big crop last year.
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Feed barley prices have been climbing in the last two weeks by as much as $15 per tonne as this year’s drought continues. Traders worry about a repeat of 2002-03 when the island continent imported close to 500,000 tonnes of feed grain.
Analysts have already cut expected Australian wheat production and more cuts might be coming.
The country’s official wheat production forecast, not due for
updating until Sept. 19, is 22.8
million tonnes, down from last year’s 25 million, but up from the five-year average of 21.1 million.
The Australian Wheat Board’s forecast, made in July, was for 18-20 million tonnes.
The International Grains Council’s outlook is for 20 million tonnes.
Grain broker Farmaco on Aug. 18 forecast 17.7 million tonnes.
The continent is shifting from winter to spring and last week some parts of Victoria state in the southeast got rain, mostly less than 25 millimetres.
But the trend is still toward dryness. Indeed, Western Australia is experiencing the driest conditions ever, even worse than the 2002-03 drought.
Television news stories tell of brown pastures and wheat that is
7.5 centimetres high when it should be 30 cm.
Australia’s Bureau of Meteorology last week forecast drier and warmer than normal conditions for the eastern and northern parts of the country for the rest of the year, but stopped short of predicting an El Nino, a climate situation that often spells dire consequences for the continent.
A GrainCorp Ltd. analyst told Reuters News Agency his company’s forecast for the eastern Australia wheat crop is now eight to nine million tonnes with a barley crop of 2.5 million tonnes.
But without rain, that could easily fall to less than six million tonnes of wheat and two million tonnes of barley, he said.
Of course, rain could rescue the situation, but if moisture does not arrive, we should see support for wheat and barley prices.
The International Grains Council report, which cut expected world wheat production to 593 million tonnes, down three million tonnes from July, appeared last week to shake wheat futures traders from their focus on the American harvest.
There is reason to believe that the global production number could fall further, given Australia’s problems and the recent harvest problems in Europe where rain has stopped combines and hurt quality.
