Australia's wheat production is likely to decline further as hot and dry weather in September, a crucial month for crop development, curbs yields, threatening to tighten global supplies.

Analysts have cut their forecasts for Australia's wheat harvest by at least a million metric tons from the official forecast made earlier this month and said more crop losses were likely if the dryness continued.

"This kind of heat has been like taking a blow torch to crops," said Stefan Meyer, a grains broker at StoneX in Sydney.

"StoneX has downgraded our production estimates for Australia-wide wheat to 24 million metric tons and expect other crops to be similarly impacted," he said, adding that 100,000 tons more could be lost each day this month unless rain fell.

Australia is the world's second-largest wheat exporter and a key supplier for Asian nations including China, Indonesia and Japan.

After months of low rainfall and in the middle of an intense heat wave, Australia's weather bureau this week confirmed that an El Nino weather pattern was underway and dry conditions would likely continue.

Temperatures rose to around 16 degrees Celsius (60 Fahrenheit) above the September average in recent days.

Ole Houe at agriculture brokerage IKON Commodities in Sydney said the wheat crop could be 1 million tons lower than the Australian government estimated on Sept. 5.

That official forecast for wheat production of 25.4 million tons was already a downgrade from an earlier government prediction and 36% less than last year's harvest, which benefited from plentiful rain.

"If the dryness continues, the Australian wheat crop is likely to be close to 22 to 23 million tons," said a Singapore-based trader at a company that sells Australian wheat to millers in Southeast Asia, adding that the crop could mature earlier, pushing the start of the harvest to October from November.

A second trader at a global trading company said dry weather into October could trim the crop to between 22.5 and 23 million tons.

For the time being, harvests in Russia, Europe and the United states mean supply is plentiful. Chicago Board of Trade (CBOT) wheat futures Wv1 this month fell to their lowest levels since 2020.

But later in the year, focus will move to harvests in Australia, Canada and Argentina. Dry weather has hit crops in all three.

Source - https://www.nasdaq.com