Bloomberg News

Australia Poised for Dry Weather as Heat Bakes U.S. Wheat

July 18, 2012

Australia, the second-biggest wheat exporter, is set to be drier-than-normal in the next three months, curbing grain production just as the worst drought in a generation parches fields across the U.S., the largest shipper.

The chance of below-median rainfall from August to October is between 60 percent and 70 percent over western New South Wales, most of Victoria and parts of central Western Australia, the Bureau of Meteorology said on its website today. South Australia and northeastern Australia are also set for a drier- than-normal season, according to the bureau.

Wheat has surged 41 percent since mid-June as the worst U.S. drought since at least 1988 scorches crops from Arkansas to Ohio and dry weather threatens output in Russia. Corn has climbed 53 percent and soybeans rose 21 percent, threatening to boost world food costs. Conditions may approach or exceed El Nino thresholds, which can bring dry weather to Australia’s east, during late winter or spring, the bureau said yesterday.

“It certainly presents a risk to agricultural production, particularly as we enter into the critical spring growing period,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia (CBA), said by phone from Sydney. “If we were to see lower exportable supplies here in Australia, that would help push the international market higher.”

Australia may produce 24.1 million metric tons of wheat in 2012-2013, 6.2 percent lower than an earlier estimate, on concern dry weather would curb plantings, the Australian Bureau of Agricultural and Resource Economics and Sciences said June 13. Output was a record 29.5 million tons in 2011-2012 as La Nina-linked rains boosted yields on the east coast.

U.S. Drought

About 55 percent of the contiguous U.S. states were in moderate-to-extreme drought at the end of June, the highest percentage since December 1956, according to the National Climatic Data Center. Crop conditions for corn and soybeans are the worst for this time of year since 1988. World wheat production will be 665.3 million tons in 2012-2013, down 1 percent from a June estimate, the U.S. government said July 11.

The rally in grain prices may drive world food costs to a record this year, Danske Bank A/S (DANSKE) said July 16. An index of 55 food items tracked by the UN’s Food & Agriculture Organization fell 15 percent since reaching a record in February 2011.

Russia’s Agriculture Ministry yesterday cut its grain-crop forecast by as much as 5.9 percent because of a drought. Farmers have harvested more than 15.7 million tons of grain, including 13 million tons of wheat, the ministry said.

Wheat for September delivery fell 1.6 percent to $8.71 a bushel on the Chicago Board of Trade at 5:44 p.m. in Singapore. Prices reached $8.985 yesterday, the highest level for a most- active contract since Feb. 15, 2011.

To contact the reporter for this story: Phoebe Sedgman in Melbourne at

To contact the editor responsible for this story: James Poole at

The Good Business Issue
blog comments powered by Disqus