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Australia cautions of downgrade ahead to drought-hit grain crops

Australian officials cautioned of a downgrade ahead to their estimate for the country's winter grains harvest – but by a limited amount, flagging the boost to crops from recent rains.

Abares, the official Australian commodities bureau, in an unusual step said it was poised in its next quarterly crop report, in December, to downgrade its forecast for the country's winter crop harvest from the current figure of 36.31m tonnes

The bureau flagged conditions that had been "generally unfavourable for crop development in the eastern states in September, with well-below-average rainfall, above-average day time temperatures and significant frost events in many regions".

The centre west New South Wales, "many" winter crops - a category which includes barley, canola and wheat- had "failed and will not be harvested".

'Outlook is favourable'

However, rains this month had gone some way to repairing yield prospects in southern New South Wales, Abares said, saying that "the rainfall this week will provide a timely boost for many crops".

"The likely benefit will be greatest for crops furthest from harvest and therefore be greatest for crops in the south [of the state] and diminish the further north crops are situated."

Forecasts for moisture also persuaded Abares against cutting its forecast for the harvest in South Australia, where "crops on Eyre Peninsula and Yorke Peninsula… were between six and eight weeks behind normal development at the end of winter".

While and crop development here had been "adversely affected by the adverse seasonal conditions in September… the seasonal conditions outlook for these regions in October is favourable with higher-than-average rainfall and lower-than-average daytime temperatures likely".

'Around average'

The bureau said that while it would be in December cutting its estimate for winter crop production in New South Wales, it did "not envisage a significant change" in its figure for South Australian output.

"We expect the December forecast for winter crop production in Australia in 2017-18 will still be around the 10-year average to 2015-16," said Abares, implying an output downgrade of only some 2%, or about 700,000 tonnes.

That is less than than the reduction that many commentators have factored in for wheat alone from the September Abares estimate of 21.61m tonnes.

Broker Benson Quinn Commodities said that "trade seems to be 17m-22m tonnes on Aussie production".

'Turned the season'

Separately, Rabobank too noted the role of recent rains in reviving crop prospects in some areas, saying the precipitation "could still bring some tonnes for some.

"Variability continues to be the theme of this year's winter harvest prospects," the bank said, noting that while canola crops "are being grazed out in central New South Wales due to frost and ongoing dryness, late-September rains have turned the season for many across the central Western Australia wheat belt."

The bank added that "well-supplied south eastern Australian ports mean prospects for Western Australia grain being called on to supply northern New South Wales and Queensland are limited".

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