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From: Paul Kern 6/16/2008 11:22:32 PM
of 1305

Australia to Grow Less Wheat Than Forecast on Dry May (Update2)

By Madelene Pearson and Gemma Daley


June 17 (Bloomberg) -- Australia, forecast to be the world's third-largest wheat exporter, may produce 8.8 percent less of the grain than previously estimated after the driest May on record.

Output may be 23.7 million metric tons in the harvest starting from October, the Canberra-based Australian Bureau of Agricultural and Resource Economics said today in an e-mailed statement. That compares with its March estimate of 26 million tons and last year's drought-reduced crop of 13 million tons.

Above-average winter rain is forecast in Queensland and parts of New South Wales, with below-average falls expected in some of Western Australia, the top wheat-growing state. Prices are down 35 percent from a February record in part on expectations a bigger Australian crop may boost exports and ease a global food crisis.

``It's a very delicately poised number this year, it's probably going to gravitate below that number,'' said Simon Roberts, head of agricultural commodities at Australia and New Zealand Banking Group Ltd. ``A lot will be determined by weather.''

Wheat futures for July delivery fell 3.25 cents, or 0.4 percent, to $8.7325 a bushel on the Chicago Board of Trade in after-hours electronic trading at 10:42 a.m. Sydney time. The commodity reached a record $13.495 a bushel on Feb. 27. It's gained 15 percent in the past month on speculation that livestock producers will feed more of the grain to their animals after corn rose to a record.

Largest Shipper

The U.S. is forecast to be the world's largest wheat shipper, followed by Canada and Australia, according to the U.S. Department of Agriculture. Australia was the sixth-largest wheat exporter last harvest after drought cut output the past two years.

The bureau's revised forecast compares with a June 16 forecast of 24.3 million tons by National Australia Bank Ltd. and a 20 million ton to 24 million ton estimate last month by Rabobank Group. Both cited the dry weather in the southern hemisphere autumn. The USDA's June 10 prediction was 24 million tons.

``With the exception of Western Australia, the majority of Australia's winter cropping regions received below average autumn rainfall,'' the bureau said in the June crop report on its Web site. ``The lack of autumn rainfall meant many winter crops were dry sown or not sown during the optimal planting window as growers waited for rain.''

Australian farmers will sow a record 14 million hectares to wheat, the bureau said. The total area sown to winter grains will be 22.3 million hectares and output of all grains may total 37.1 million tons. Barley output may be 7.9 million tons and canola production is forecast at 1.7 million tons, it said.

`Widespread Rainfall'

``Widespread rainfall in early June in the eastern states provided the moisture for growers to complete intended cropping programs,'' the bureau said. ``Rainfall during the growing season will be critical to these production forecasts being realized.''

The chance of above-average rain is between 60 percent and 70 percent over much of Queensland and northeastern parts of New South Wales from June to August, according to the Bureau of Meteorology's Web site. In contrast, the south-west corner of Western Australia has only a 30 percent to 40 percent chance of above-average rain.

``If this rainfall outlook is realized, it is likely to have a negative impact on yields in Western Australia,'' the commodity forecaster said. ``Conversely the impact on yields in Queensland and northern New South Wales is likely to be positive.''

Crops sown in northern Western Australia state are starting to show signs of moisture stress because of below-average rain in May, it said.

To contact the reporter on this story: Madelene Pearson in Melbourne on [e-mail]; Gemma Daley in Canberra at [e-mail]
Last Updated: June 16, 2008 21:43 EDT

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