Australia cuts wheat hopes, warning over dryness

Australia cut its forecast for its next wheat harvest, cautioning over the El Nino weather pattern, and its potential for causing eastern dryness which has already curtailed output of summer crops such as cotton and sorghum.

Australia, the southern hemisphere's largest wheat exporter, will produce 24.59m tonne of the grain in its harvest late in 2014, Abares, the official crop bureau said, cutting its estimate from the 24.80m tonnes forecast in March.

The figure is well below the 27.01m tonnes produced last year, despite a forecast of a 2% rise to 13.84m hectares in plantings, some 200,000 hectares more than initially expected.

Abares said that the idea of a rise in wheat seedings is "largely because of expected favourable gross margins", a factor which has raised expectations for sowings of canola too to 2.74m hectares, up 300,000 hectares from the previous figure, meaning an increase area from last year.

'Critical to development'

The bureau said that while conditions for autumn plantings had been "favourable" in most areas of Australia, there were "low levels of soil moisture" in parts of New South Wales, the second-ranked wheat growing state, and Queensland.

In Queensland, "rainfall in April and May was patchy, with below-average rainfall in the southern and western regions and average rainfall elsewhere", Abares said.

Further rains "will be critical to the development of winter crops, particularly in areas where soil moisture levels are low".

"If sufficient and timely rainfall is not received yields are likely to be reduced in these areas," Karen Schneider, Abares executive director, said.

'Constrained by rainfall'

Already, the dryness has left Australian farmers with lower harvests of summer crops, such as sorghum, grown mainly in New South Wales and Queensland, and of which output has halved to a 16-year low of 1.1m tonnes, below the previous estimate of 1.28m tonnes.

The dry weather, besides prompting a cut plantings, spurred a 25% yield drop too, with some New South Wales suffering an extra hit from late rains.

"The quality of grain sorghum is below average on the Liverpool Plains, where the grain size is small and there is shot and sprung grain because of rain during harvest," Abares said.

In cotton, production was downgraded by 30,000 tonnes to 910,000 tonnes, despite a retreat in sowings largely to irrigated areas, meaning the lack of rainfall in main eastern growing areas had essl effect.

Nonetheless, "growth in the average yield of marketable cotton lint was constrained by rainfall in March 2014, particularly in the cotton growing regions of New South Wales".

El Nino looms

And hopes of an improvement in weather conditions are being undermined by the prospect of an El Nino pattern, which typically causes dryness in parts of Australia.

"El Niño is often, but not always, associated with below-average rainfall during the second half of the calendar year across large parts of southern and inland eastern Australia," Abares said.

The weather phenomenon typically causes warmer temperatures too, which "can exacerbate the effect of below-normal rainfall by increasing evaporation and lead to lower soil moisture levels".

About two‐thirds of El Niño events since 1900 "have been associated with drought over large areas of Australia", the bureau added.

Rains on their way?

However, shorter term, eastern Australia is poised for some rainfall this week.

"Friday and Saturday look to provide the best chance for rain, with a broad area from central Queensland through the Maranoa, Darling Downs and right through the New South Wales cropping belt looking likely to get at least 10mm-25mm, and up to 50mm in places," broker Pentag Nidera said.

"Whilst no-one is suggesting these forecast rains will deliver anywhere near an ideal start [to the growing season] they will be an improvement."

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