Fwd: Flood Destruction in Australia May Propel Wheat Crop to Record

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Flood Destruction in Australia May Propel Wheat Crop to Record
2011-01-19 13:01:00.0 GMT

By Wendy Pugh
Jan. 20 (Bloomberg) -- Rain that caused billions of dollars
of destruction in Australia could propel wheat output in the
fourth-largest exporter to a record next harvest and boost
irrigated crops after floods swept formerly parched land.
Heavy rains saturated soils, providing moisture for the
next wheat-growing season and raising dam levels for irrigated
crops such as cotton, commodities analyst Wayne Gordon and
sustainability analyst Tracey Allen at Rabobank Groep NV said in
an interview yesterday.
Rising milling wheat and cotton supplies from Australia may
help curb global prices that soared last year on concerns that
demand may outpace supply. Floods this month followed the
country's wettest July-to-December on record, ending a drought
that lasted a decade in some areas and filling dams in the
Murray-Darling Basin, which produces more than a third of the
nation's food supply.
"It's plausible to see that we could plant and perhaps
grow a record wheat crop in the coming year," Gordon said by
phone. Still, that depends on improved production in Western
Australia, where drought persists, and "top-up" rains in the
east, he said. The grain is mostly planted from April to June.
Wheat futures on the Chicago Board of Trade gained 47
percent last year after Russia's worst drought in at least 50
years prompted the country to ban exports and amid concern that
rains would cut milling-quality supplies from Australia. The
contract reached a five-month high of $8.25 a bushel on Jan. 3.
Cotton on ICE Futures U.S. in New York reached a record $1.5912
a pound on Dec. 21.

Crop Forecast

Australia may produce 25 million metric tons of wheat from
the current harvest, the U.S. Department of Agriculture said
Jan. 12. Output may reach a record 26.8 million tons, the
Australian Bureau of Agricultural and Resource Economics and
Sciences, known as Abares, estimated Dec. 7, as production in
the east offset drought in Western Australia. The country
produced 26.1 million tons in 2003-2004, according to Australian
government data.
The bureau will update its estimate for the current harvest
on Feb. 15 and release its 2011-2012 forecast on March 1.
Rainfall levels suggest eastern Australia will produce
another big crop this year, and history suggests it's unlikely
Western Australia's crop will slump by the same amount for a
second year, Peter Rowe, Perth-based manager of agribusiness
projects and strategy at Bankwest, said by phone.
"I could see us exceeding the 26.1 million tons of 2003,"
he said. "We could easily give that a nudge." This season's
harvest of 25 million tons likely included 10 million tons of
feed-quality grain, the bank, a unit of Commonwealth Bank of
Australia, said this week.

Natural Disaster

The flooding in Victoria, Queensland and New South Wales
was Australia's biggest natural disaster in economic terms,
Prime Minister Julia Gillard said Dec. 17. Rebuilding may cost
as much as A$20 billion ($20 billion), or about 1.5 percent of
gross domestic product, economists from Australia & New Zealand
Banking Group Ltd. wrote in a research reported dated Jan. 18.
Queensland Premier Anna Bligh has said the state's death
toll could be as high as 32 and that 2.1 million people had been
affected. The floods disrupted coal exports, damaged roads and
rail networks and inundated farms.
The short and medium-term effect would be severe for
"directly impacted" cropping businesses, while relatively high
commodity prices and favorable conditions for livestock
production in many areas would help offset the impact on average
farm incomes, Abares said in a statement this week.

Future Prospects

"Prospects for future seasons remain bright, with
significant increases in water storages and soil moisture
profiles," the bureau said.
The Murray-Darling Basin, which produces more than 90
percent of Australia's cotton, had its wettest 12 months in 2010
after a record series of below-average rainfall years going back
to 2001, according to the Bureau of Meteorology. Water storages
were 81 percent full as of Jan. 12, compared with 26 percent at
the start of 2010, while dam levels outside the region have also
"In terms of the longer-term benefits, we haven't seen
storages at these sort of levels for probably more than a
decade," Rabobank's Allen said. "Across the basin it is
security for irrigators moving into the next few seasons."
The current cotton crop will be mostly harvested from March
to May, with forecasts for output to top 4 million bales for the
first time now in doubt after the floods. The record was 3.6
million bales, government data show. An Australian bale weighs
227 kilograms (500 pounds).

Flood Losses

Flood losses may cut output this season by about 400,000
bales to 3.4 million bales, National Australia Bank Ltd. said
last week. The next crop will be planted from around October.
"The good subsoil moisture and increased allocations bode
well for next season, especially when considering that storage
levels for dams in the cotton-producing regions stood at just 20
percent this time last year," wrote Michael Creed, a Melbourne-
based agribusiness economist at the bank.
Rising prices and the availability of irrigation water is
likely to ensure "another large cotton plant" for 2011-2012,
Luke Mathews, an agricultural commodities strategist at
Commonwealth Bank of Australia, said earlier this month.
Still, for grain producers the wet weather is hampering
access to fields and helping weeds flourish, which could create
problems for farmers as they prepare for their next crops.
"The soil profiles across the eastern states augur well
for a potentially above-average crop production year, barring
the catastrophic events we have seen this year," Pete Mailler,
Grain Producers Australia Chairman and a New South Wales farmer,
said from near flood-affected Goondiwindi this week. "More
water doesn't necessarily equal more grain and more profit."

For Related News and Information:
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--Editors: Matthew Oakley, Jarrett Banks.

To contact the reporter on this story:
Wendy Pugh in Melbourne +61-3-9228-8736 or

To contact the editor responsible for this story:
James Poole at +65-6212-1551 or