December 2, 2014

Australia, the world’s fourth largest wheat exporting country, has cut its production forecast by 4% this week because of concerns over intensifying drought conditions in key growing regions. Global wheat prices have recently strengthened on concerns over Russia curbing exports and U.S. production, and this cut to Australia’s output estimates could bolster prices further. However, the same shortfall will cut revenues for handlers such as GrainCorp., Viterra and CHB Group. Wheat production for the current season is set at 23.22 million tons by the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) – down from a September estimate of 24.23 million tons. Since July of this year, large areas of the country have not gotten much rain, with crop production suffering across the east and south coastal regions which have received less than half their average rainfall. Drought is also predicted to affect other Australian crops with ABARES cutting its forecast for cotton production to 3.324 million tons from 3.39 million tons, and summer sorghum, hay, and corn are predicted to fall to a five year low. This in turn could cut the availability of feed causing more animals to go to slaughter, increasing beef exports, and negatively affecting milk production.

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