National Australia Bank Ltd. upgraded its wheat production forecast for this crop year to 23.8 million metric tons, but said it couldn't go as high as the mid-September forecast of 25.1 million tons by the government's Australian Bureau of Agricultural and Resource Economics.
The latest forecast by the bank, a major agricultural lender, represents an upward revision by 700,000 tons from last week and 1.4 million tons since August, and is up 2.1 million tons on actual output of 21.7 million tons in the last crop year ended March 31, 2010.
"While a crop of 25.1 million tons certainly is possible, at this stage we feel it is too early to call such a large crop," the bank said in a monthly rural commodities wrap, citing a smaller estimate of east coast acreage planted to wheat than Abare's.
Western Australia, which usually accounts for 40% of national wheat output, could also face further downward revisions depending on weather conditions, NAB reported.
Higher national wheat harvest estimates have improved export prospects, with the bank forecasting last week exports from the new crop could swell to 17 million tons, compared with 15 million tons from the previous crop, maintaining Australia's position as a major supplier to the global trade.
Last week, Abare projected exports from the 2010-11 crop at 18.4 million tons valued at A$5.22 billion.
Taking a global view, NAB reported there might be some further downside to production and quality estimates, with a major risk being the slow pace of the planting of the new Russian crop. The sowing window there is closing and while global wheat stocks are ample, much of this isn't readily available to the market, such as the stocks in China and India.
"With U.S. corn yields being lowered, the grain market is the tightest it has been for some time and the market can't afford a shortfall in a major producer like Russia," NAB reported.
An ideal combination of strong global prices and a solid production outlook has lifted the outlook for the sector, with NAB expecting the gross value of farm production to increase 13% in 2010-11 to A$46.6 billion. The outlook for farming incomes has also picked up, with NAB forecasting the net value of farm production to increase by more than 55% in 2010-11 to A$9.7 billion, it reported