Australia on Tuesday lowered its forecast for wheat exports over the 2019/20 season by nearly 18% as a drought wilts crops in the world’s No.4 exporter of the grain.
That comes after Australia’s chief commodity forecaster last week cut its production forecast for the 2019/20 harvest by more than 11% as the drought leaves crops struggling to survive.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) on Tuesday said wheat exports would total 11.7 million tonnes in the crop year beginning in July, down from its previous estimate in March of 14.2 million tonnes.
Lower Australian exports will support global benchmark prices, which have rallied nearly 30% over the last six weeks amid concerns over tighter global supplies.
Dwindling wheat exports are also likely to hit Australia’s stuttering economy. Wheat is the country’s most lucrative rural export from an agricultural sector worth about A$50 billion ($34.39 billion).
Australian end-users of wheat have been forced into rare imports. Australia’s Department of Agriculture said last week that the first shipment of the commodity into the country in more than a decade had arrived, with ABARES saying more imports were likely.
“More permits are expected to be issued for (imports of)wheat and other grains,” ABARES said.
Much of Australia’s east coast has recorded less than 40% of typical rainfall levels over the last six months, data from the country’s bureau of meteorology shows.
WOOL FORECAST CLIPPED
ABARES also cut its estimate for 2019/20 wool production by nearly 9% to 352,000 tonnes, down from its March outlook of 385,000 tonnes.
Australia provides 90% of the world’s exported fine-wool used in clothing manufacturing, but the drought has left farmers without enough food or water to keep livestock alive.
ABARES cut its forecast for milk production in the 2019/20 season by 2.5% to 8.6 billion liters, down from its March forecast of 8.82 billion liters.
The expected fall puts more pressure on the country’s largest milk processors, Saputo Inc, Fonterra and Bega Cheese Ltd, which have seen profits squeezed by intense local competition for milk supplies.