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Dry Weather Prompts ABARE to Cut Australian Wheat Prediction

Earlier this week private firms predicted that the Australian wheat harvest would be around 21 million tons because of the exception yields that were being seen in parts of New South Wales. However Wednesday the Australian Bureau of Agricultural and Resource Economics came out with an official estimate substantially lower than that figure.

ABARE predicts a harvest of 19.9 million tons, a reduction of 11% from their last estimate that was released in September.

"It is a fairly significant cut," says USDA grain analyst Jerry Norton. "Still it is up 50% from year to year."

It is definitely a step up from the last two year's wheat harvests, which were crippled by a devastating drought in Australia. Following a bumper crop in 2005 of 25 million tons, the past two growing seasons combined didn't match that harvest. Most analysts though expected a larger crop this year because of increased acreage planted to wheat.

"Because of those drought years in 2006 and 2007, they liquidated a lot of sheep herds so they had a lot of grazing land they put into wheat the past year," Norton says. "So we thought we had a very optimistic view of the crop going back up to those 25 million ton levels early on, but the dryness in southern Australia really has affected them."

U.S. farmers have benefited from the short wheat crops in Australia the past two years increasing sales to Asian markets.

"We compete with the Australians into the Japanese market, which is a high-quality wheat market," Norton says. "So when there are years where there are crop problems or crop failures like they've had in the past two years in the Southern Hemisphere - even Argentina had some problems - there is a lot stronger demand out of Japan for U.S. and Canadian wheat. With this rebound even with this reduced crop we're going to see some increased competition in those markets."