The Australian research firm Abares expects the grain harvest in the country to be significantly lower than previously expected. For wheat it even records a minus of almost 20%. Looking at the 10-year average, this 35% reduction in production is even greater.
Arabes is part of the Australian Department of Agriculture. On Tuesday December 3, this research body reports a 3% lower yield for the 2019/2020 harvest. The total harvest volume of 29,4 million tons is 13% less than expected in September.
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If we zoom in on wheat, the reduction is 18%. This is mainly due to the ongoing drought, mainly on the east coast. A volume of 15,85 million tons of wheat is the smallest harvest in 11 years and 35% less than the 10-year average. For the third year in a row, the wheat harvest is below average. A record production was achieved in the 2016/2017 season.
According to Peter Gooday, the director of Abares, this sharp reduction is the result of disappointing growing conditions in Western Australia and the southern part of New South Wales. Drought-affected crops are mostly harvested for fodder and are not threshed, or have not emerged at all due to lack of rainfall before and after sowing.
Economic problems
The extremely small grain harvest is a major blow to the agricultural sector and the economy in the country, which is already under considerable pressure. Australia is 1 of the 10 largest grain exporters in the world and its exports account for 2% of the gross domestic product. The wheat price for first quality baking wheat is already at its highest point in 5 months.
The past 3 months have collectively ensured the driest spring ever in the country. Wildfires are a major problem in several states. Even before the summer has really started, the daytime temperatures are above 40 degrees.
Persistent drought
The National Meteorological Bureau also expects significantly less rain in the summer months; especially in Queensland and the northern part of New South Wales. Linked to the lower stock of soil moisture, the 'summer harvest' is estimated to be more than 50% lower. The area has been halved. This mainly concerns sorghum, cotton, grain maize, soya and sunflowers.
A reduction of almost 20% is significant for the country's export position. Still, when the news was announced, no shock wave passed through the market. Market analysts had been counting on a wheat volume below 16 million tons for some time. The CBoT closed lower for wheat on Monday, Dec. 2, after hitting $200 a ton the day after Thanksgiving. Wheat exports from the United States are lower, USDA export figures show.
United States situation
In the Northern Hemisphere, different circumstances play a role. Despite the snow storms, soybeans and corn are still being harvested in the northern states of the United States. 11% of the maize is still in the country. 96% of the soy acreage has now been harvested.
In Paris, the Matif closed higher again, at €186,25 per tonne (+€0,75). The Egyptian state agency GASC is again in the market to buy wheat for the second half of January. Exporters from the Black Sea region and France compete with each other to fulfill these export spots.