Record Wheat Harvest in Australia Now Seen Over 5% Bigger

(Bloomberg) -- Australia's record wheat production this year is now estimated to be even larger than expected after mostly favorable weather, helping to ease global shortages caused by drought and the war in Ukraine.

The harvest in one of the world's biggest exporters is seen at 36.3 million tons, about 5.5% more than predicted in late November, according to a report from government forecaster Abares. Some private forecasters have gone even higher, with IKON Commodities estimating the crop at 39 million tons.

The global grains market has been thrown into turmoil by Russia's invasion of Ukraine, with traders reluctant to enter into new deals with the two countries after the West announced moves to prevent the central bank from using foreign reserves to blunt sanctions, and also excluded some lenders from the SWIFT messaging system that underpins trillions of dollars of transactions.

Russia and Ukraine supply more than 25% of the world's wheat exports, about fifth of corn sales and a similar share for barley. “What happens from here really depends on both the supply coming back in, particularly from North America and particularly how their seasonal conditions play out,” Jared Greenville, executive director of Abares, said at a conference. “But it'll be hard to believe that it won't at least maintain high prices for longer.”

Abares increased its wheat estimate even after record November rainfall in Queensland and New South Wales led to widespread quality downgrades and an unprecedented amount of feed quality wheat from New South Wales. The forecaster raised its prediction for the barley harvest by 3% to a record 13.7 million tons, and for canola by 12% to an all-time high of 6.4 million tons.

Other notes from Abares:

Smaller Australian crops are probable in the coming year, partly as a result of more average seasonal conditions, and international prices are likely to drop from current highs on higher overseas production
The overall value of farm commodity production in 2022-23 is forecast to decline 6% to A$76 billion ($54.6 billion)
Global climate outlooks show average to above-average rainfall is slightly more likely from March to May 2022 across major grain- and oilseed-producing regions
In Australia, conditions over the medium term are most likely to be adequate but not highly favorable, with a high likelihood of at least one dry year over the next five years
The Abares report was written before the invasion of Ukraine and the move by Western nations to impose sweeping sanctions on Russia