Australia heat wave scorches wheat belt, stokes supply fears

decrease font size  Resize text   increase font size       Printer-friendly version of this article Printer-friendly version of this article


Australia's worst heatwave on record is scorching the grain belt, potentially hurting wheat sowing prospects in the world's second biggest exporter this year and deepening concerns over global supplies amid a relentless U.S. drought.

Wheat planting in Australia is at least two months away, but temperatures exceeding 40 degrees Celsius (104 degrees Fahrenheit) have already sapped the soil of much-needed moisture, analysts and traders say.

A decline in Australia's wheat production for a second consecutive year could fuel a rally in benchmark Chicago futures , which jumped to a one-month high on Tuesday on expectations that drought will lower yields of the winter wheat crop from the United States, the world's top exporter.

"A lot of areas may go into planting with not much soil moisture, where as last year we had good summer rains so the crop was planted with full moisture profile," said a Melbourne-based analyst. "Supplies are going to tighten and we could see wheat lead a rally in the grains complex."

Australia's grain belt includes most states, excluding the Northern Territory. Western Australia and New South Wales are the largest wheat producers.

The U.S. Department of Agriculture, in its January report on farm product supplies, reduced global wheat inventories by almost 10 percent to 176.64 million tonnes at the end of the 2012/13 marketing year in June.

Wheat ended 2012 as the best performing commodity on the Thomson Reuters-Jefferies CRB index as the market was buoyed by lower production in some of the world's top exporting countries, including Australia and Russia.

Australia's wheat production last year fell by almost a quarter from an all-time high of nearly 30 million tonnes in 2011. Russia's wheat exports this year are estimated at 10.5 million tonnes by the USDA, half of what it shipped a year ago.

WHEAT FUTURES HOTTING UP

Australian new-crop milling wheat futures for January 2014 delivery have climbed almost 6 percent since the beginning of last week on concerns over hot weather.

"Australian basis are firming which reflects the market is nervous," said Stefan Meyer, a manager for cash markets at brokerage INTL FCStone in Sydney. "Growers are not selling grains."

Spot basis for Australian prime wheat are trading at a premium of 65 cents a bushel over March CBOT contract, which according to traders is a huge spread as most of last year the basis were 40 to 60 cents under CBOT futures.

The record-breaking heat wave has so far melted road tar and set off hundreds of wildfires. The hot conditions are set to last until end-March, the weather bureau said, forecasting a 60 percent chance that temperatures will exceed the average across the New South Wales and Queensland wheat belt.

The average maximum temperature earlier this month exceeded 39 degrees Celsius for seven consecutive days, breaking the previous record of four consecutive days in 1973.

Much of New South Wales, where most of the premier hard wheat is grown, received less than 40 percent of its average rainfall in the last three months, and rain is likely to be within average limits across both the east coast and Western Australia, the weather bureau has said.

Rains following a tropical storm have, however, eased some heat stress in parts of Queensland this week.

The storm crossed the Queensland coast with heavy rain and wind gusts of up to 100 kph (60 mph) on Tuesday. It is forecast to move further inland before tracking south on Wednesday.

"We have had excellent rains in some parts of Queensland," said Meyer. "It was up to six inches in some areas." (Editing by Miral Fahmy)


Buyers Guide

Doyle Equipment Manufacturing Co.
Doyle Equipment Manufacturing prides themselves as being “The King of the Rotary’s” with their Direct Drive Rotary Blend Systems. With numerous setup possibilities and sizes, ranging from a  more...
A.J. Sackett Sons & Company
Sackett Blend Towers feature the H.I.M, High Intensity Mixer, the next generation of blending and coating technology which supports Precision Fertilizer Blending®. Its unique design allows  more...
R&R Manufacturing Inc.
The R&R Minuteman Blend System is the original proven performer. Fast, precise blending with a compact foot print. Significantly lower horsepower requirement. Low inload height with large  more...
Junge Control Inc.
Junge Control Inc. creates state-of-the-art product blending and measuring solutions that allow you to totally maximize operating efficiency with amazing accuracy and repeatability, superior  more...
Yargus Manufacturing
The flagship blending system for the Layco product line is the fully automated Layco DW System™. The advanced technology of the Layco DW (Declining Weight) system results in a blending  more...
Yargus Manufacturing
The LAYCOTE™ Automated Coating System provides a new level of coating accuracy for a stand-alone coating system or for coating (impregnating) in an automated blending system. The unique  more...
John Deere
The DN345 Drawn Dry Spreader can carry more than 12 tons of fertilizer and 17.5 tons of lime. Designed to operate at field speeds up to 20 MPH with full loads and the G4 spreader uniformly  more...
Force Unlimited
The Pro-Force is a multi-purpose spreader with a wider apron and steeper sides. Our Pro-Force has the most aggressive 30” spinner on the market, and is capable of spreading higher rates of  more...
BBI Spreaders
MagnaSpread 2 & MagnaSpread 3 — With BBI’s patented multi-bin technology, these spreaders operate multiple hoppers guided by independent, variable-rate technology. These models are built on  more...


Comments (0) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left


NORAC UC4.5™ & UC5™ Precision Spray Height Control

NORAC offers two Spray Height Control systems that can be installed on most sprayer models. UC5™ is an ISOBUS system ... Read More

View all Products in this segment

View All Buyers Guides

Feedback Form
Feedback Form