Looming El Niño Forces Australia to Lower Down 2014-15 Wheat Production Forecast by 1%

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By Esther Tanquintic-Misa | June 12, 2014 12:21 PM EST

A farmer uses a threshing machine as he harvests wheat crop in Arbeen, in the eastern Damascus suburb of Ghouta June 1, 2014. War and drought have cut Syria's wheat forecast to between 1 million and 1.7 million tonnes, agricultural experts and traders say. Before the conflict, it typically produced around 3.5 million tonnes a year. Picture taken June 1, 2014. REUTERS/Diaa Al-Din (SYRIA - Tags: POLITICS CONFLICT FOOD AGRICULTURE CIVIL UNREST BUSINESS COMMODITIES)
A farmer uses a threshing machine as he harvests wheat crop in Arbeen, in the eastern Damascus suburb of Ghouta June 1, 2014. War and drought have cut Syria's wheat forecast to between 1 million and 1.7 million tonnes, agricultural experts and traders say. Before the conflict, it typically produced around 3.5 million tonnes a year. Picture taken June 1, 2014. REUTERS/Diaa Al-Din (SYRIA - Tags: POLITICS CONFLICT FOOD AGRICULTURE CIVIL UNREST BUSINESS COMMODITIES)

Australia on Wednesday lowered its 2014-15 wheat production forecast by one per cent due to the looming El Niño weather phenomenon.

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) in a report said the world's fourth-biggest exporter of wheat could yield only an output of 24.6 million metric tonnes in 2014-2015. This compares with a March forecast of 24.8 million tonnes.

"Sufficient and timely rainfall over winter will be critical to the development of winter crops, particularly in those areas where soil moisture levels are presently low," the bureau said.

Overall 2013 production reached 27 million tonnes.

"Yields are likely to be lower than currently assumed if sufficient and timely rainfall is not received."

Reports recently released by the Australian Bureau of Meteorology and the NOAA of the U.S. said the looming El Niño could become established by August in the Pacific Ocean.

Read: Occurrence of El Niño 2014 Still on Track, Becomes Established by August

Once this happens, southern Australia will experience a drier-than-average winter while the rest of the country will have a hotter-than-average winter.

Farmers drive sacks of wheat in Hama countryside June 3, 2014. Picture taken June 3, 2014. REUTERS/Nour Fourat (SYRIA - Tags: POLITICS CIVIL UNREST CONFLICT AGRICULTURE BUSINESS COMMODITIES)
Farmers drive sacks of wheat in Hama countryside June 3, 2014. Picture taken June 3, 2014. REUTERS/Nour Fourat (SYRIA - Tags: POLITICS CIVIL UNREST CONFLICT AGRICULTURE BUSINESS COMMODITIES)

Actually this early, ABARES said crop production in northern New South Wales and throughout Queensland have been less favourable due to low levels of soil moisture.

A low production turnout from Australia will most likely hurt global prices of the commodity. Already in May, wheat in Chicago dropped 13 per cent. According to the United Nations, world food prices dropped for a second month in May because of declining grain costs.

Morgan Stanley said June 9 a well-oiled world food reserve will limit any potential price impact to El Nino-related supply concerns in Australia.

The ABARES report pointed out harvest from Western Australia may only reach a total 8.4 million tonnes in 2014-2015, from 10.5 million tonnes a year ago.

Production in New South Wales is anticipated to jump from 6.6 million tons last year to 7.3 million tonnes.

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(Photo: / )
A farmer uses a threshing machine as he harvests wheat crop in Arbeen, in the eastern Damascus suburb of Ghouta June 1, 2014. War and drought have cut Syria's wheat forecast to between 1 million and 1.7 million tonnes, agricultural experts and traders say. Before the conflict, it typically produced around 3.5 million tonnes a year. Picture taken June 1, 2014. REUTERS/Diaa Al-Din (SYRIA - Tags: POLITICS CONFLICT FOOD AGRICULTURE CIVIL UNREST BUSINESS COMMODITIES)
(Photo: / )
Farmers drive sacks of wheat in Hama countryside June 3, 2014. Picture taken June 3, 2014. REUTERS/Nour Fourat (SYRIA - Tags: POLITICS CIVIL UNREST CONFLICT AGRICULTURE BUSINESS COMMODITIES)
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