'Too soon to be alarmed' over Aussie wheat outlook

Concerns eased for the Australian wheat crop as Commonwealth Bank of Australia forecast a strong harvest, saying it was "too early to be alarmed" over setbacks from dry soils which look poised for some rain relief.

The bank, in its first forecast for the 2013 harvest in the southern hemisphere's top producing country, pegged it at 24.9m tonnes, down 2.8% year on year but still a historically strong result.

CBA acknowledged some setback to prospects for Australia's prospects in canola given "poor soil moisture profiles" in eastern states, which have persuaded some farmers to ditch the rapeseed variant, which has an early sowing window.

The canola harvest will fall by 200,000 tonnes from last year's record 3.1m-tonne crop.

West vs east

However, in wheat, CBA analyst Luke Mathews flagged a "positive planting outlook" in Western Australia, typically the top grain producing state, "because of above-average summer/autumn rain, including good falls this week".

The Western Australia harvest was seen recovering 33% from last year's drought-hit result, to 9.10m tonnes.

That would more than make up for potential setbacks further east, where South Australia had "minimal" subsoil levels, and parts of New South Wales, the second-ranked grains producing state, were "critically dry".

"It remains too early to become too alarmed about overall winter crop planting and production prospects," Mr Mathews said.

"Seasonal conditions in spring, not autumn, have the most influence on realised yields."

Weather factor

He acknowledged that the "subsoil moisture deficiencies" in eastern Australia left the crop more heavily reliant on rainfall during the growing season than in 2012 and 2011, when "vast moisture reserves carried east coast crops through significant periods of spring dryness".

However, the medium-term weather outlook, as forecast by the Australian Bureau of Meteorology, appears "relatively benign".

And short-term, some dry areas look set for rain relief.

Weather service MDA said that an "upturn in rains across Western Australia and South Australia through the weekend will further improve moisture there which will favour wheat germination.

"Some slight improvement is also expected in Victoria this weekend," although rainfall in Queensland and New South Wales next week "will likely be too light to significantly ease dryness and wheat stress there".

Australia forecasts

The CBA forecast puts the bank in line with Abares, the Australian commodities bureau, which has also forecast a 24.9m-tonne Australian wheat crop.

However, analysis group Lanworth on Wednesday cut its forecast to 24.3m tonnes, citing eastern Australian dryness.

The United Nations Food & Agriculture Organization on Thursday forecast a 24.0m-tonne Australian crop, saying that while farmers looked like raising sowings by some 4%, "if good rainfall doesn't arrive soon in the eastern grain belt, where moisture conditions are unfavourably dry, farmers may revise down their planting intentions".

Wheat futures for January closed unchanged at Aus$279.00 a tonne in Sydney on Thursday, down 2.8% from a three-month high reached last Friday.

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