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Australian Wheat Output May Increase 92%, Bank Says (Update2)

By Madelene Pearson
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May 6 (Bloomberg) -- Australia, the world's second-biggest wheat exporter before two years of drought ravaged crops, may almost double its harvest this year as higher prices and better weather encourage planting, National Australia Bank Ltd. said.

Production may rise 92 percent from a year earlier to 25.1 million metric tons, up from 23 million tons forecast in February, Frank Drum, the bank's agribusiness economist, said today by phone from Melbourne. The forecast is still less than the 26 million tons predicted in March by the Australian Bureau of Agricultural and Resource Economics.

Rain has eased drought in Australia, the sixth-largest wheat exporter this year. Bigger crops may help to improve global food supplies and slow inflation that has stoked social tension in some developing countries. Wheat prices surged 67 percent in the past year, reaching a record $13.495 a bushel on Feb. 27.

``I don't think there's any doubt that the high current grain prices are having an effect on farmers' decisions on what they plant,'' Drum said. ``Particularly given how early it is in the season I am reluctant to go too much higher at the moment. That's not to say there isn't potential to see a crop higher than that 25 million tons.''

Australia produced 13.1 million tons of wheat last year after drought killed crops. The country's exports in the year ending June 30 may fall to 7.5 million tons, according to the U.S. Department of Agriculture. That's down from more than 16 million tons in 2005-06, which was second only to U.S. shipments.

Bigger Crops

Conditions have improved in Western Australia state and in northern New South Wales state after rainfall lifted soil moisture, Drum said.

Grain growers in Australia are seeking to plant bigger crops so they can replenish income depleted by the country's worst drought on record. Farmers rely on rain at this time of the year to sow crops before the harvest that starts from October.

Wheat futures in Chicago traded at $8.0525 a bushel at 12:03 p.m. Sydney time, near a five-month low and about 40 percent below February's record high.

Total winter grain production in Australia may increase 72 percent this cropping year, National Australia Bank Ltd. said.

The nation may produce 38.8 million metric tons of all grains including wheat, barley and canola, the bank, Australia's biggest lender to farmers, said today in an e-mailed statement. That's 22 percent above the five-year average of 31.8 million tons, it said.

Cotton Output

Australia's cotton crop is also being helped by rainfall, and output will almost triple next year as farmers expand their fields, according to the U.S. Department of Agriculture.

Production may soar to 1.5 million bales in the year ending September 2009, from 525,000 in the year ending this September, the agency's Foreign Agricultural Service said in a report posted on the USDA Web site. Harvested area will more than triple to 190,000 hectares, the report stated.

To contact the reporter on this story: Madelene Pearson in Melbourne on [e-mail]
Last Updated: May 5, 2008 22:34 EDT

http://www.bloomberg.com/apps/news?pid=20601081&sid=ae1smWwsC070#