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Australia eyes 10 percent increase to grain crop: NAB

Xinhua, June 3, 2016 Adjust font size:

Australia is eyeing a 10 percent increase in wheat production over the upcoming season thanks to favourable conditions in the lead up to winter, an unwelcome sign in a market awash with grain.

Australia was eyeing an unfavourable wheat season due to a dry early planning season, however the National Australia Bank (NAB) on Friday said it's central case for Australia's wheat crop is 26.1 million tons in the 2016/17 season, exceeding official predictions of 24.5 million tonnes.

"This would represent a 10.7 percent increase in production on last season," NAB agriculture economist Phin Ziebell said in a research note.

The outlook is based on good to excellent planting rainfall combined with an outlook of above average rainfall during the autumn months due to a waning El Nino weather system, and 50 percent chance of La Nina.

La Nina is generally associated with above average rainfall in eastern and northern parts of Australia which bring about higher Australian wheat production.

The outlook however is not without risks as Australia's variable climate may bring lower then expected rainfall. Conversely higher than expected rainfall from a potentially stronger than expected La Nina risks drenching the nation's grain belts.

A bumper Australian crop, predicted to be its best in five years, is the last thing the global grain industry needs with supply severely outstripping demand, leading benchmark prices to remain at historical lows.

The price of wheat is so low, U.S. producers are eyeing loss making crops as they enter into harvest season for winter wheat, while silos are running stockpiles at record highs. It's been suggested some U.S. farmers will dump grain in parking lots or vacant buildings.

Though the bulk of Australia's wheat is exported, Australian prices have not suffered as much while remaining competitive due to the weak Australian dollar.

Australia is losing its competitive edge however as significantly low freight costs are allowing non-traditional competitors to tap Australia's export markets. Endit