Australian drought - poor spring rains - higher world wheat prices in prospect - low stocks and heavy demand

The national outlook for Australia for total spring (September to November) rainfall, shows no strong swings in the odds towards wetter or drier conditions over most of Australia. However, the odds favour a wetter than average spring in southwest WA, while a drier than average spring is the more likely outcome in some relatively small patches in eastern Australia.

The pattern of seasonal rainfall odds across Australia is a result of continuing higher than average temperatures over parts of the south tropical Pacific Ocean, and also in parts of the tropical Indian Ocean.

Any shower activity in Australia during the next seven days will be light andmostly confined to Victoria and southern portions of West Australia, accordingto the DTN Meteorlogix forecast (subs). They also said that further losses to production can be expected under the current deficient rainfall pattern.

Argentina has had better luck with moisture in its wheat fields recently.Light to moderate rain, with some locally heavier totals over southern BuenosAires, were observed during the past 24 hours.

Australian Wheat yield forecasts.

Agricultural production models (through DPI&F/APSRU) still suggest remarkably varying potential yield values for this year, largely due to very low soil moisture levels and relatively poor rainfall in regions such as inland NSW, South Australia and southern inland Queensland.

In his weekly Radio Broadcast on Saturday Premier Howard said the Federal Government has pledged to provide further financial support to drought-stricken farmers, if necessary.

With the drought showing no sign of breaking, Prime Minister John Howard promised that the government would stand “shoulder to shoulder” with rural and regional Australia.

“If more is needed to ensure our regional communities and farms survive
this prolonged drought it will be provided,” he said in his weekly radio message.

“The drought is continuing to have a devastating impact on much of rural and regional Australia."

The impact will be felt further afield as wheat prices show no sign of declining and demand is increasing as living standards grow in China and India.

In Chicago, wheat for December delivery surged to an all-time high of US$8.38 a bushel and Canada said crop yields would be down by 20% and may produce its smallest wheat crop in five years because of reduced plantings and drought damage. Wheat prices have jumped 110 per cent in the past 12 months and have risen threefold since 2000.

The U.S. Department of Agriculture has forecast a fall in global inventories to their lowest level in 26 years.

There was a 1 day Pasta Strike in Rome and other Italian cities on Thursday 13th September as people protested over increases in pasta flour prices. Italy produces only about half of the high-protein durum wheat used to make high-quality pasta and bread; the rest is imported from overseas markets including the United States, Canada and Ukraine.

In France the price of a standard crusty baguette has risen 8% this year and now costs just less than US$1 and three times that in the US if you can find a supplier.

The Ukraine is likely to extend the current grain export quotasuntil Jan. 1, 2008, and not Oct. 1 as was previously planned, the press serviceof the agriculture ministry reported.