Frost 'bigger threat' than rain to Australia's wheat output

28.09.2016

Frost, rather than excessive rainfall, represents the biggest threat to Australia's wheat harvest, a leading commentator said, dismissing as "ill-informed" ideas of crop damage from inundations in eastern areas.

Western Australia, Australia's top wheat-growing state, is expected on Thursday to suffer the latest of a series of frosts, which represent a significant threat to well-developed crops, which have lost their freeze-hardiness.

"The outlook for tonight is not good, not good at all," James Fell, chief analyst at Melbourne-based Grain Information Services told Agrimoney.com.

"Temperatures at ground level could drop as low -4 [Celsius] tonight, right in such a critical phase for yield determination."

Forecasts in retreat?

The succession of frosts has dented hopes for an overall grains harvest for Western Australia which CBH, which handles the vast majority of the state's harvest, pegged in July at 14m-16m tonnes, potentially eclipsing the all-time high of 15.9m tonnes set three years ago.

"The conditions in Western Australia are dragging down the national crop forecast," said Mr Fell, a former International Grains Council economist and wheat analyst at Abares, who co-ordinated the bureau's quarterly Crop Report briefings.

Separately, National Australia Bank pegged the Australian wheat crop at 27.6m tonnes, an upgrade of 400,000 tonnes from its forecast last month, but well below a 28.1m-tonne estimate from Abares two weeks ago, besides the even higher forecasts that some private analysts have released.

Agritel, the Paris-based consultancy, said on Thursday that "soft wheat production in Australia could be below cut 29m tonnes, while analysts were betting on 30m tonnes one month ago".

'Hurt quality'

In fact, excessively wet conditions in eastern Australia have been the focus of many crop concerns, with Agritel adding that "rains are damaging" the crop, besides late-harvested crop in Canada too.

In the US, broker Futures International that "eastern Australia will see heavy rain this week, raising quality issues with the wheat crop", while CHS Hedging said that "rains in Australia could drop production slightly or hurt quality".

National Australia Bank said that "waterlogging and rain damage on the east coast", besides frost harm in Western Australia, represented bars to a higher harvest forecast, although it did say that a crop above 29m tonnes was a "real possibility".

'Doomsayers will be wrong'

However, Mr Fell said that history suggested that comment on rain depressing the quantity of the east coast harvest was "ill-informed", with the boost to yields more than offsetting losses to flooding.

"In Australia, rain makes grain and we saw that in 2010 when the east coast suffered extreme rainfall.

"The doomsayers were wrong in 2010 and they'll be wrong again."

However, he acknowledged that the rainfall did threaten the quality of the crop.

"Yes, protein will likely suffer and recently premiums for APH2 have risen," APH2 being a high-protein wheat grade.

'Quality concerns'

A long list of countries have already reported large, but lower protein, harvests – a reflection in some countries, such as France, of weather damage and in other, such as Russia, of the pay-off that tends to happen in terms of strong yields "diluting" protein levels.

Most lately, Canada's wheat, which mainly comprises spring-sown varieties, has attracted worries as rains have hit late-harvested crops.

Minneapolis-based broker Benson Quinn Commodities flagged the "quality concerns that continue towards the Canadian and Australian crops" as a factor which may be buoying prices of higher protein wheat.

Minneapolis-traded spring wheat futures earlier this week saw their premium to lower-grade, Chicago soft red winter wheat touch $1.04 Ѕ a bushel, December basis, beating a contract high set in February last year.


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