After a brutally hot and dry September, Australia’s wheat crop is expected to take an even bigger plunge than forecasters have already projected. The Australian Bureau of Agriculture currently estimates the crop at just over 25 million metric tons, slightly less optimistic than the United States Department of Agriculture’s 26 MMT estimate but higher than many private analysts. With the El Niño weather pattern expected to extend the poor growing conditions, most expect the downgrades will continue.
StoneX is among those already forecasting a sub-25 MMT crop in Australia. Pegging production at 24 MMT, the group warned in late September that the crop might be losing as much -100,000 metric tons every day amid a lack of rainfall. According to Australia’s Bureau of Meteorology, most regions in Australia experienced their lowest September rainfall on record and most received no precipitation at all during the final week of the month.
Australia has been a particularly vital wheat supplier the past few years in light of drought-related losses in much of the northern hemisphere as well as Russia’s invasion of Ukraine that disrupted global supplies. Australia was able to export well over 20 MMT the past three seasons, including 27.5 MMT in 21/22 and a record 32.5 MMT 22/23, thanks to back-to-back bumper harvests the past three seasons.
Last year’s record crop of nearly 40 MMT has been referred to as a “once in a generation harvest” for Australian wheatbelt farmers. Production was mostly boosted by above-average rainfall that caused devastating flooding in many parts of the country. The plentiful rains were a direct result of the La Niña weather phenomenon that contributed to drier-than-normal conditions in much of the US.
La Niña has now ended and transitioned into El Niño, the opposite extreme in the El Niño/Southern Oscillation (ENSO) cycle. Typically, El Niño years brings drier conditions to Australia, meaning there may not be much relief for Australia’s wheat crop. There is some rain in the forecast for the early part of October but it’s not clear whether it will be enough to revive the crop’s prospects.
The bulk of Australia’s wheat harvest typically occurs in November but analysts say the hot, dry weather may cause the crop to mature earlier, pulling harvest into October. Some have also predicted that a continuation of dry weather in October could trim the crop closer to 22-23 MMT, which would obviously mean less available supplies to export. Australia’s ag ministry currently pegs exports at 20.4 MMT for 2023-24.
Australia’s crop troubles come as wheat prospects across the globe continue to get downgraded, including Canada, Argentina, and the EU. In fact, global wheat production in 2023/24 is projected to fall for the first time since 2018/19. As a result, the USDA in its most recent Supply and Demand report forecast 2023/24 world ending stocks will fall to 258.6 million, which would be the lowest since 2015/16. (Sources: ABARES, USDA, Reuters)
