6 September 2007PlanetarkSambit Mohanty
Chicago wheat futures marched to another record high on Wednesday on Australia's gloomy outlook, which adds to the pressure on dwindling world grain supplies.
"The hot, windy day this week caused huge damage so we saw a number of crops written down on Monday on the basis of one day's wind in Western Australia," Kim Chance, the state's Minister of Agriculture and Food, said in an interview late on Tuesday.
Wheat from Western Australia makes up the bulk of Australia's exports, which mainly go to Asia and the Middle East. Australia is normally the world's second-largest wheat exporter after the United States.
December wheat futures on the Chicago Board of Trade hit a record on Tuesday on concerns about supplies and India's growing appetite for the grain. Prices pushed further into uncharted territory on Wednesday, hitting a record of US$8.35 a bushel, before easing back.
Wheat prices have nearly doubled since April, fuelled by big demand from importers and a range of dire predictions for the crop around the world.
Chance predicted Australia would export of 10 to 14 million tonnes this year, more than from the drought-hit crop last year but still well below earlier predictions.
"We will be able to satisfy the requirements of our core buyers only and some buyers at the fringe of the core," he said.
Because of the severe drought, Australian exports in the last crop year shrivelled to 10.4 million tonnes from 16.0 million the year before, according to the Australian Bureau of Agricultural and Resource Economics.
"I would say commodity traders trying to get a handle on the Western Australian wheat crop, they would be going to the lowest of the lowest parameters and for those looking at the whole Australian wheat crop it is still not positive," Chance said.
"We won't make 8 million tonnes deliveries," he said.
In the five years to 2006, Western Australia produced an average 8.2 million tonnes annually, almost 40 percent of the average national wheat crop of 21.6 million tonnes.
Chance said that dry weather in Australia and Argentina and small crops in the Black Sea and Pakistan could further ignite world wheat prices.
"It's a pretty sad outlook with European wheat having trouble and the Black Sea having drought. It's not good," Chance said.
ANALYSTS CUT FORECASTS
Australia's wheat crop nationwide has been hit with extremely dry conditions throughout August, particularly in the past two weeks, analysts said on Wednesday.
This has reduced almost all forecasts of the crop to less than 20 million tonnes, Ron Storey, head of private forecaster Australian Crop Forecasters, said.
ACF this week reduced its forecast to 19.5 million tonnes and even this was at the upper end of the forecast range, he said.
Other trade forecasts were for 18 million or less, he said.
As recently as late July forecasters were calling for a crop of 26 million tonnes, steady from two years ago after drought slashed the 2007 crop to just 9.8 million tonnes.
The government forecaster, the Australian Bureau of Agricultural and Resource Economics, is still calling for a crop of 22.5 million tonnes but its next update will be on Sept. 18.
Western Australia's main grains trader, Cooperative Bulk Handling, told Reuters on Wednesday that it was still keeping its estimate of between 5 million and 9 million tonnes for the state.
The wide range is due the many variables which could affect the crop between now and the beginning of harvest in late October, spokesman Rhys Ainsworth said.
