(Bloomberg) — Prospects for Australia’s upcoming wheat crop are turning more optimistic, helping to buffer an increasingly grim global supply outlook for the grain.
Well-timed rain across major growing regions in the eastern states of New South Wales, Queensland and Victoria have buoyed the outlook, prompting many analysts to upgrade their initially dire forecasts for the 2026 crop. In addition, fears of shortages of fertilizer and fuel driven by the war in Iran have eased.
In May, Rabobank projected the wheat crop could come in as low as 21.3 million tons, down more than 40% on the previous year. Now, the bank predicts it could come in as high as 30 million tons. That’s smaller than last year’s 35.8 million tons, but still above the 10-year average for Australia’s wheat production. Bendigo Bank Agribusiness’ revised forecast is similar at around 30 million tons, with a potential upside of up to 33 million tons.
Australia is one of the world’s largest grain exporters, sending significant volumes to Southeast Asia and the Middle East. The upgrade to its crop forecast comes at a critical time as the global outlook for wheat supply worsens, weighed down by disruptions to shipping in the Black Sea and heat waves across the Northern Hemisphere. The situation sent benchmark Chicago wheat futures to a two-year high in July.
With exports from other grain-producing nations constrained, Australia could help fill the gap for major importers such as Indonesia, the Philippines and potentially China.
Julia Hausler, a farmer in northeastern Victoria, said she would never have expected to be looking at such a strong crop if you’d asked her earlier this year. At the time, expectations for severe heat and dryness driven by the El Niño weather phenomenon and the Iran war constraining fuel and fertilizer supply had her fearing the worst.
But unusually strong and consistent rainfall in the first six months of the year has set her family’s farm up for a strong crop, while the war’s impact on farming inputs is less than they had feared. Australia diesel prices have fallen by about a quarter from their April peak and fertilizer costs have eased globally.
“We’re tracking quite well with the challenges that have been thrown at us,” she said. “The only challenge you have now is the prices are not reflecting the rest of the world’s sort of shrinkage situation.”
Bendigo Bank Agricultural Analyst Rod Baker said the improving outlook in Australia’s wheat crop has helped put downward pressure on US wheat futures, along with the large supplies carried over from the previous year. Prices this week neared a one-month low.
However, shipments from the Black Sea have been severely impacted by a recent escalation in the war between Russia and Ukraine, two of the biggest global suppliers. Both have attacked each other’s port infrastructure, limiting exports for at least the short term.
Dennis Voznesenski, agricultural economist at the Commonwealth Bank of Australia, said new corridors may be found to export wheat from the region, but longer delays at damaged ports could prompt buyers to seek out alternative sources. “If the Black Sea genuinely remains very constrained in their exportability, they’ll be looking very closely everywhere else,” he said.
Listen and follow The Bloomberg Australia Podcast on Apple, Spotify, YouTube or wherever you get your podcasts.
At the same time, wheat crops across the US, Canada and the European Union have been impacted by significant heat waves, potentially reducing supply and quality among other major producing nations. In France, output is expected to drop as a result of extreme heat, while planted acres in Canada are down on the previous year.
Despite the growing optimism among Australian farmers, one major unknown lies ahead. A significant El Niño is still forecast to impact the country in the second half of the year, historically bringing high heat and little rainfall at a critical moment in the crop-growing cycle.
Some farmers said there has already been enough rainfall this year for crops to mature without the usual spring showers, while others are more worried about the heat risk. Wheat is typically harvested beginning in October.
Arthur Gearon, a farmer in Queensland, said he had used an artificial intelligence application to calculate the chances of rain going forward and didn’t like the results. He’s looking to clear some of his wheat fields in the hope of planting sorghum over summer instead.
“We actually get a better summer than average in these sort of patterns,” Gearon said. “So I’ll abort the crop if need be and I’ll go for sorghum. It’s more profitable.”
To get Bloomberg’s Business of Food newsletter in your inbox, sign up here.
More stories like this are available on bloomberg.com
