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Rabobank: Australia's Wheat, Barley Proteins Expected Down

14 November 2011

AUSTRALIA - Australia has begun its winter crop harvest in some areas with central Queensland almost complete and Geraldton in Western Australia just commenced, according to the Rabobank Agribusiness Review, November 2011.

The central Queensland harvest has achieved slightly better than expected wheat yields however the protein is well below average. It is expected that for most wheat growing areas of Australia, protein will be below average.

The harvest in Geraldton continues to be threatened by wet weather conditions amd many of the grain delivery sites have installed equipment to measure the effects of weather damage.

Wet weather is also anticipated to hamper the southern Queensland and New South Wales crop harvest as the Australian Bureau of Meteorology is forecasting above average precipitation over the coming months.

The canola harvest has commenced along the East Coast with yields as expected, however the oil content is above average, a pleasant surprise for farmers. Prices have fallen sharply for wheat, barley and canola which has resulted in many farmers yet to market this year's crop.

Barley is Australia's second biggest crop, and it is expected that this too will be below average protein. This wil likely result in more barley meeting malt specifications than the average, assuming wet weather doesn't result in downgrading.

It is expected that for this season Austrailia will export a record amount of wheat, potentials in excess of 21 million tonnes.

Overall Report Highlights

Wet and cloudy conditions generally covered most regions of New Zealand, due to easterly pressure events. La Niña has returned and Australia experienced a wetter-than-normal month in October, with around one-and-a-half times the normal rainfall received, averaged across the country.

Political confusion in the Euro zone continues to obscure resolution of the sovereign debt crisis, causing ongoing financial market volatility and impeding the global economic recovery. On the upside, strong third quarter GDP growth in the United States has made the prospect of a relapse into recession less likely.

Both the New Zealand and Australian dollar have regained ground from their early October lows, and are expected to trade around current levels in the near term. The Reserve Bank of Australia cut interest rates on Melbourne Cup day by 25 basis points to 4.5% in response to the weaker global economic outlook and more benign domestic inflation.

For the dairy market, modestly softer market dynamics since May 2011 have continued to result in price weakness through October. Global supply is running ahead of the previous year's level in all key regions. Sluggish demand in Europe and the US has made more milk available for export, and reduced imports into China has also added pressure to a softening market.

Excellent seasonal conditions has supported young cattle prices at high levels, while heavy cattle have felt the pressure of a rebounding Australian dollar. In the global trade arena, the US government has finally ratified the US-Korea Free Trade Agreement, which will allow for progressive reductions of the 40% tariff on US beef imports. The Korean government is currently working towards ratifying the agreement which is intended to come into force on 1 January 2012.

Global grain prices are trading in a narrow range after a significant fall in October as the uncertainty over EU sovereign debt concerns continues to weigh on grains and oilseeds markets. In terms of fundamentals, the final US corn yields and the effect of La Niña on production Brazil and Argentina are the biggest swing factors presently.

The price of oil remains volatile, reflecting swings in global market sentiment. It is currently trading around $110/barrel.

Further Reading

- You can view the full report by clicking here.

TheCropSite News Desk

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