Australian Wheat Output Under Threat as Dry Weather Set to Linger

(Reuters) – Dry weather will persist across Australia until at least the end of September, the country’s weather bureau said on Thursday, in a forecast that threatens to further lower wheat production in the world’s No. 4 exporter.

There is just a 30% chance that Australia will record average rainfall between July 1 and Sep 30, Australia’s Bureau of Meteorology (BOM) said.

Temperatures will also be above average over the three-month period, BOM said, pegging the chance of exceeding average maximum heat levels at 80%.

The forecast is bad news for Australian wheat growers who are facing a third year of drought conditions along the country’s east coast.

Australia’s chief commodity forecaster earlier this week lowered its forecast for wheat production by more than 11% as it warned crops on the country’s east coast will be in desperate need of rains in September.

It pegged production of the country’s largest rural export at 21.2 million tonnes, down from its previous estimate in March of 23.9 million tonnes and 14% below the 10-year average.

Lower production may help support benchmark global wheat prices but it threatens to be a drag on the Australian economy.

Wheat is the country’s most lucrative rural export from an agricultural sector worth about A$50 billion.

With Australia on course to have only a small exportable crop, traditional buyers of its wheat such as Indonesian and Japanese millers will be forced to look to alternative markets such as Russia at a time when prices are rallying.