Australia, the world’s fourth largest wheat exporter, expects production of its largest rural commodity to hit a 10-year low this season at 19.1 million tonnes, as drought across the country’s east wilts output.
Many private forecasters had pegged production from Western Australia at above the 9.6 million tonnes recently estimated by the country’s chief commodity forecaster.
But as temperatures plummeted over the weekend and meteorologists warned of further cold weather this week, analysts and traders said on Monday that estimates were being quickly wound back.
“There were some in the market that were expecting 12 or even 13 million tonnes. That won’t happen now,” said Phin Ziebell, an agribusiness economist at NAB.
“It will be a struggle to get to double figures.”
Tight supplies from Australia will add to concerns over global shortfalls that helped push benchmark prices to a three-year high last month.
Lower production from Western Australia may limit the country’s exports.
Australia typically ships out more than two-thirds of its production but, with drought drying out grazing and crop land across the country’s east coast, domestic millers and livestock producers are likely to dominate consumption.
Major customers of Australian wheat such as Indonesia will be forced to look to alternative markets for their supplies, a boost to the export prospects of the United States and South America particularly.
For Australia, the adverse weather in Western Australia darkens the economic outlook.
The Reserve Bank of Australia in August warned that the severe drought along the east coast would cause a potential headwind to the economy.
Source: Nine.com
