Australia & New Zealand Bank set a fresh low for expectations for the Australian wheat crop, whose woes are gaining increasing global market attention, warning that dryness has put it on course for a five-year low.
Paul Deane, senior ag economist at ANZ, said that the bank was expecting an Australian wheat crop of about 20m tonnes, some 3m tonnes below its previous forecast, cautioning over the dryness which has hurt parts of the eastern crop besides Western Australia, the top grain-growing state.
In New South Wales, "there are certainly some areas that are struggling", while in the Mallee region of Victoria "did not have ready rainfall".
While there was scope for some repair to these crops, and a higher national figure, in Western Australia, where drought has received more attention, "certainly for the north wheat belt, the damage has been done.
"Crops are past their key point" when rains might restore yields, Mr Deane told Agrimoney.com, estimating the state's crop at roughly 6m tonnes, a near-halving year on year.
The one state over which the bank was relatively upbeat was in South Australia, where Mr Deane "did not see any reason at this point" to cut his harvest forecast from 4.0m tonnes, noting "some reasonable crops in some areas".
The estimate is above a 3.89m-tonne forecast from Abares, the official Australian commodities bureau, and a 3.64m-tonne figure from state farm officials on Friday, noting "highly variable" yield potential.
Australian wheat harvest history
2011-12: 29.515m tonnes
2010-11: 27.410m tonnes2009-10: 21.83m tonnes
2008-09: 21.420m tonnes
2007-08: 13.569m tonnes
"Early-sown crops were moisture has been conserved from summer rains have average to above average potential," the officials said.
"Later-sown crops are beginning to suffer and will need a favourable spring to achieve average yields."
Below other forecasts
However, ANZ's national wheat crop forecast, which includes a figure for the eastern Australian crop of about 10m tonnes, is well below anAbares estimate, on Tuesday, of 22.5m tonnes. Rabobank last week cut its estimate to 22.8m tonnes.
It also increases doubts over the US Department of Agriculture's forecast on Wednesday of a 26.0m-tonne harvest.
Nonetheless, it tallies with numbers being suggested within Australia's farming community.
In Western Australia, grower Aaron Edmonds, warning that Abares "has overestimated Australia's crop", pegged the harvest at "sub 20m tonnes, in the 15m-20m-tonne window".
"I am hearing about dryness all across the southern cropping zones for the spring to date," he said.
"This is the end of the season that counts in Australia because we are always trying to fill grain when it is pretty warm and sunny."
Australia's wheat crop is being viewed with particular interest by traders, given the disappointing harvest in the European Union and, especially, the former Soviet Union besides, the dent to feed grain supplies from drought in US corn-growing regions.
Australia is the southern hemisphere's top wheat exporter, and has been expected to retain second place among global shippers in 2012-13, ahead of Canada and the European Union.
At Chicago-based broker RJ O'Brien, Richard Feltes cautioned that wheat prices were "posed for another leg higher if Australian dryness persists into early October".
ANZ's Mr Deane said that Australian prices, which earlier in the week gained Aus$10 a tonne versus Chicago ones as crop fears mounted, could be poised for further outperformance if rains to not arrive in the next fortnight.
"In this sort of environment, Australian basis might grow quite strongly," he said.