Thursday, January 24 07:48:31
Australia's worst heatwave on record is scorching the grain belt, potentially hurting wheat sowing prospects in the world's second biggest exporter this year and deepening concerns over global supplies amid a relentless U.S. drought.
Wheat planting in Australia is at least two months away, but temperatures exceeding 40 degrees Celsius (104 degrees Fahrenheit) have already sapped the soil of much-needed moisture, analysts and traders say.
A decline in Australia's wheat production for a second consecutive year could fuel a rally in benchmark Chicago futures , which jumped to a one-month high on Tuesday on expectations that drought will lower yields of the winter wheat crop from the United States, the world's top exporter.
"A lot of areas may go into planting with not much soil moisture, where as last year we had good summer rains so the crop was planted with full moisture profile," said a Melbourne-based analyst. "Supplies are going to tighten and we could see wheat lead a rally in the grains complex."
Australia's grain belt includes most states, excluding the Northern Territory. Western Australia and New South Wales are the largest wheat producers.
The U.S. Department of Agriculture, in its January report on farm product supplies, reduced global wheat inventories by almost 10 percent to 176.64 million tonnes at the end of the 2012/13 marketing year in June.
Wheat ended 2012 as the best performing commodity on the Thomson Reuters-Jefferies CRB index as the market was buoyed by lower production in some of the world's top exporting countries, including Australia and Russia.
Australia's wheat production last year fell by almost a quarter from an all-time high of nearly 30 million tonnes in 2011. Russia's wheat exports this year are estimated at 10.5 million tonnes by the USDA, half of what it shipped a year ago. ( C ) Reuters