Aug 3 (Reuters) – Australia’s 2011/12 wheat crop is suffering from cold dry weather in the key eastern grain producing state of New South Wales, which may cut output, the Commonwealth Bank of Australia said in a report on Wednesday.
Offsetting the deteriorating outlook in New South Wales is an improved outlook for Western Australia, typically the biggest grain exporting state in the world’s fourth-biggest wheat shipper.
"(We have) seen an improvement in production conditions in Western Australia which is positive," the report said.
The bank’s agricultural commodities strategist Luke Mathews is keeping his forecast of a 24.3 million tonnes 2011/12 wheat harvest, made in May, but may adjust it following visits to crop growing areas this month.
The forecast is line with other private forecasts but sits below the government’s chief commodities forecaster’s estimate of a 26.2 million tonnes crop for 2011/12, just below its estimate of a record 26.3 million tonnes crop last season.
In 2010/11, the harvest was boosted by rain in eastern states that increased yields at the expense of quality and offset a large drop in the Western Australian harvest due to drought.
The Commonwealth Bank’s June quarter agribusiness index, which measures 15 rural-dependent companies’ share price performances, under-performed the Australian Stock Exchange’s S&P/ASX 200 index for the second straight quarter.
The poor second-quarter performance was largely due to a ban on live cattle exports to Indonesia. The ban was imposed over concerns that some Indonesian abattoirs were inflecting unnecessary stress and pain on cattle being slaughtered.
The trade is resuming following stringent conditions on the way cattle are treated from farm to Indonesian slaughter houses.
In the second quarter, the bank’s agribusiness index fell 14.0 per cent compared to a 3.7 drop in the Australian Stock Exchange’s S&P/ASX 200.
In the first quarter, the bank’s agribusiness index under performed the S&P/ASX 200 due to flooding and a devastating cyclone in the north-eastern tropical state Queensland.
Still, the index returned a 3.1 percent gain for the quarter compared with a 3.2 percent rise for the S&P/ASX 200.
Despite setbacks, the bank’s remains positive about the near-term future
"Grain prices are expected to remain above historic averages through 2011/2012 as a result of tight supplies," said Brendan White, the bank’s top agribusiness executive.
He was also confident about Australia’s cotton industry which in 2011/12 is expecting record production for the second straight year.
"Confidence among our primary producers will be particularly important moving forwards, as it will hopefully lead to greater levels of investment in the sector to take advantage of more favourable moisture profiles and anticipated higher yields, particularly in the cotton industry," said White.