Australia's New Wheat Crop Forecast Raised To 21.8 Mln Tons

Rabobank Australia Thursday increased its forecast for Australian wheat production this crop year to 21.8 million metric tons, citing "outstanding" seasonal conditions in the eastern states.

Rainfall in the next two months remains critical to the outlook. It's still early in the cropping season, particularly in parts of South Australia and Western Australia, which are yet to receive soaking rains. However, conditions in many regions are expected to see planted areas back near historic levels, the bank reported.

"Australian East Coast winter cropping prospects look outstanding, with Queensland and northern New South Wales experiencing one of the best starts in more than 20 years," the bank reported in a monthly agribusiness review.

A month ago, Rabobank estimated the new crop to be planted mostly in May and June and harvested mostly in November and December around 20 million tons, reflecting the effect of low prices.

Actual official output last crop year ended March 31, 2010, was 21.7 million tons, about two-thirds of which was available for export, making Australia a major supplier to the global trade.

Rabobank, a major agricultural lender, said wheat exports are ticking along, with shipments of 4.0 million tons in the first four months of this marketing year, which started Oct. 1, 2009, around 16% above the year-earlier period."

There have been some reported shipping cancellations on the East Coast, reflecting the weak market conditions for lower quality wheat," the bank reported, without providing details.

As a result, the bank expects Australian wheat exports to fall short of its previous target for this marketing year of 15 million tons.

As for canola, Rabobank expects the Australian area planted to fall a little as a result of reduced plantings in lower rainfall areas of Western Australia, South Australia and Northern Victoria.

The bank didn't estimate production this crop year. Actual output last crop year reached 1.9 million tons.The expected move away from canola isn't surprising, with recent estimates placing gross margin projections at the lowest across all rainfall districts, relative to that of other grains and legumes, it said.

With such a large South American soybean crop on the way and global canola stocks building, it's difficult to imagine a sustainable rally in Australian canola prices until at least mid-2011, the bank said.

Source: CME Group