Australia upgrades wheat crop but warns on sorghum

Australian officials cautioned over the prospects for the country's output of summer grains, such as rice and sorghum, even as they raised their estimate for the ongoing wheat harvest, citing a strong harvest in western areas.

Abares, Australia's official commodities bureau, lifted by 1.75m tonnes to 26.213m tonnes its forecast for the wheat harvest in the southern hemisphere's biggest exporter and producer of the grain.

That harvest represents a 17% rise year on year, although remains below the record 29.91m-tonne crop reaped two years ago.

The upgrade reflected higher hopes for the harvest in Western Australian, seen at 9.61m tonnes, 2.28m tonnes higher than previously expected, and in Victoria, offsetting downgrades to expectations for New South Wales and Queensland, where "hot and dry weather", and frosts, hurt yields.

"In Western Australia and Victoria, generally favourable conditions and timely rainfall during spring increased prospective yields, particularly in southern and central Western Australia," Abares said.

'Unfavourable conditions'

The fresh estimate contrasts with a broadly downward trend among forecasts by other commentators, thanks to the dryness and frosts in New South Wales and Queensland, with the US Department of Agriculture's Canberra bureau last month pegging the wheat crop at 23.5m tonnes.

However, ideas of strong grain supplies in Australia were curtailed by a caution by Abares over prospects for the summer crops currently being planted, thanks to dryness in the east.

"Hot and dry seasonal conditions over winter and spring in northern New South Wales and Queensland," the major growing states for the likes of sorghum and cotton, "have depleted soil moisture levels and created unfavourable conditions for the planting of summer crops", the bureau said.

And official meteorologists believe Queensland is likely to remain relatively dry, with a "below-average" chance of rains in cropping district exceeding the average, although prospects are better for New South Wales.

"Given the current low levels of soil moisture in summer cropping regions, sufficient and timely rainfall will be vital for development of crops," Abares said.

Sorghum squeeze?

The bureau forecast a 9% fall to 1.2m hectares in sowings of summer crops, but with output likely to fall faster, given the pressure on yields from the low soil moisture levels.

For rice, area is expected to fall by 11% to 100,000 hectares and output by 22% to 907,000 tonnes.

For sorghum, area is expected to drop by 7% to 552,000 hectares and production by 20% to 1.6m tonnes.

The prospect of a weak sorghum crop comes at a sensitive time, given demand for feed grains from domestic cattle producers, suffering a fall in pasture condition from the dry weather, and with China expected to import record amounts of the grain, from Australia and the US, too.

"There has been and will be more early sorghum planted, but it's too early to say whether it will be sufficient to bridge the supply gap that looks likely to bite some time in early-to-mid February," Queensland-based broker Pentag Nidera said.

Market reaction

On the Sydney futures exchange, sorghum for January delivery closed unchanged at Aus$280.00 a tonne.

However, wheat for January gained 0.7% to Aus$297.00 a tonne, matching the contract's highest close in more than a year.

The March wheat lot edged 0.1% higher to Aus$296.80 a tonne, a three-month closing high.

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