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Lower El Nino threat improves Australia outlook

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Expectations for Australia's winter crops remain somewhat above official expectations amid a more positive weather outlook

"Crop conditions are exceeding expectations in several of the key wheat states," stated Gail Martell of Martell Crop Projections.

Australia's Bureau of Meteorology recently lowered the chance of an El Niño event in the second half of 2014 to 50% from 70% previously.

El Niño events trigger above average temperatures and low rainfall.

"Given the current observations and the climate model outlooks, the Bureau's ENSO Tracker has shifted to El Niño WATCH status," the Bureau reported at the end of July. "This means the chance of El Niño developing in 2014 is approximately 50%, which remains significant at double the normal likelihood of an event.

The Bureau still cautioned "the establishment of El Niño before year's end cannot be ruled out," but suggested if an El Niño "were to occur, it is increasingly unlikely to be a strong event".

Rainfall improves expectations

Official expectations for the current winter wheat crop remain somewhat negative though.

"Australian grains production remains subject to seasonal uncertainties with an El Niño event and below average rainfall forecast for eastern Australia," noted the US Department of Agriculture's Australia bureau.

The Bureau project wheat production to fall by 9% to 24.5m tonnes, despite an increase in the area harvested.

Similar production is forecast by Abares, the research arm of the Australian Government Department of Agriculture, which forecasts wheat production of 24.6m tonnes.

By contrast the National Australia Bank forecast a "fall of only 1.0m tonnes in Australian wheat production this year, from the 27.0m tonnes recorded for 2013-14".

"After a long and hot summer, decent autumn rainfall across many wheat growing regions has improved growers' yield expectations," Khan Horne, General Manager of NAB Agribusiness, said.

Not all positive

While the key wheat growing state of Western Australia has seen a more favourable outlook not all states enjoy the same optimism.

"The outlook in northern New South Wales and Queensland is slightly less optimistic, with low subsoil moisture and heavy frosts in the Darling Downs placing pressure on crops and decent rain is needed in," noted NAB's Horne.

"Wheat yield in El Niño years is generally significantly lower than in non-El Niño years and yields mostly track below the national average during these periods," Phin Ziebell, NAB Agribusiness Economist said recently.

"BoM's latest forecasts suggest that rainfall in southern New South Wales may be below average from August to October," Ziebell noted.

"The conclusion is that a very favourable Australia wheat harvest may be ruled out, due to drought concerns in New South Wales," suggest Gail Martell.

"Assess" Russia impact

The Australian Government said it was "working to assess the full impact" of Russia's food import ban.

"The Australian Government is disappointed by the Russian Government's decision to ban imports of agricultural products, raw materials and foodstuffs from countries that have imposed sanctions in relation to Russia in response to events in Ukraine," a statement from the ministers' of trade and Agriculture said.

Putting the impact of Russia's ban into perspective the statement stated, "Australian agricultural exports to Russia in 2013 were valued at about A$405m but included some commodities now already banned". The statement indicates Australia's trade with Russia represents "one per cent" of agricultural exports.

By James Moore

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