Bloomberg News

West Australia’s Grain Harvest Seen Dropping 40% on Weather

July 30, 2012

Grain output in Western Australia, the country’s biggest wheat grower, may drop 40 percent as dry weather and frost threaten crops just as a drought in the U.S. pushes prices to the highest since 2008. Futures extended gains.

Total production may be 9 million to 11 million metric tons in 2012-2013, according to Max Johnson, grain operations manager at CBH Group, the state’s biggest handler. That compares with a record harvest of 15 million tons a year earlier. About 65 percent to 70 percent of the crop may be wheat, Johnson said.

Wheat is poised for the biggest monthly gain in two years, and corn extended a record rally today, as the U.S. drought and heat waves in Europe hurt harvest prospects. Surging prices have increased concern world food costs will rebound. Wheat yields in Russia have dropped 31 percent, Interfax reported last week.

“We need an extended rainfall all the way through the end of September to even try and get it back on track,” Johnson said by phone from Perth on July 27. “We’ve seen frost after frost after frost all the way over the Wheatbelt that has retarded growth or put it in dormancy. That’s hurting us.”

Wheat for September delivery gained as much 2.4 percent to $9.1975 a bushel on the Chicago Board of Trade and was at $9.1525 at 5:35 p.m. in Singapore, 21 percent higher this month. The price hit $9.4725 on July 23, the highest since August 2008. Corn rallied as much as 3 percent to $8.1725 a bushel today.

Cooler Temperatures

Most of Western Australia had below-average rainfall from April to June and has been exceptionally dry in July, according to David Jones, the Melbourne-based head of climate monitoring and prediction at the Bureau of Meteorology. The state also had cooler-than-normal minimum temperatures in January through June, according to the bureau. The harvest usually starts in October.

Australia may produce 24.1 million tons of wheat in 2012- 2013, 6.2 percent lower than an earlier estimate, and less than last year’s record 29.5 million ton crop, the Australian Bureau of Agricultural and Resource Economics and Sciences said June 13. Western Australia may harvest 8.7 million tons of wheat from 11.7 million tons a year earlier, it said. In 2010-2011, dry weather cut Western Australia’s wheat production by 38 percent.

World wheat output may drop to 664.6 million tons in 2012- 2013 from 695.9 million tons in 2011-2012, the International Grains Council said on July 26. The outlook for Russia’s harvest was cut to 45 million tons from 49 million tons at the start of the month and down from 56.2 million tons in 2011-2012.

Russian Supply

In Russia, with grain crops gathered from 24 percent of the sown area, the wheat harvest reached 19.4 million tons, about 11 percent more than a year earlier, the Agriculture Ministry said on its website today. Total grain output was 24.8 million tons as of July 26, down by about 2 percent, it said.

About 60 percent of U.S. spring wheat was rated good or excellent as of July 22, from 65 percent a week earlier, U.S. Department of Agriculture data show, while corn is in the worst shape since 1988. The U.S. is the biggest shipper of both crops.

Surging corn prices prompted Japan, the largest buyer, to boost feed-wheat purchases to 334,349 tons in the first five months of this year, from 62,415 tons a year earlier, according to data from the finance ministry.

In Western Australia, the state’s western grain-growing regions may get as much as 10 millimeters of rain in the four days to Aug. 2, according to the Bureau of Meteorology. “Three or four weeks of good weather and it could bounce up very quickly,” Johnson said. “Wheat is a very resilient grain.”

To contact the reporter for this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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