SYDNEY, Sept. 13 (Xinhua) -- Australia's agriculture forecaster has raised its crop forecast by 16 percent as wet winter conditions and a favorable spring outlook have farmers eyeing record breaking harvests.
Australia's wheat production is set to hit 28.08 million tonnes during the 2016/17 season, up from the 24.52 million tonnes forecasted in June, while Canola production has been lifted by 23 percent to 3.6 million tonnes, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) said on Tuesday.
Should forecasts be met, it would the second largest crop on record for the world's fourth largest wheat exporter, while it would be the third largest for Canola.
"In a vast country like ours it is a challenge to have commodities performing well across the nation, so it's great to see consistent positive crop predictions for our farmers," Australian Agriculture Minister Barnaby Joyce said in a statement.
The 2016/17 season is a doubled edged sword for Aussie farmers following years of prolonged drought, as bumper crop could further drag global benchmark prices in a world awash with wheat, despite a bullish U.S. Department of Agriculture report showing end stocks will slightly fall.
Australian farmers will likely do little more than break even as the majority of the crop is unsold following increased low-cost competition into its traditional Southeast Asian markets from eastern European producers.
"The (global) crop is massive, and a major shock is required to kickstart the market," Mecardo analyst Andrew Whitelaw said.
"It is extremely unlikely that we will see any events of the magnitude to considerably drive prices higher between now and harvest."
Australia's largest wheat exporter Cooperative Bulk Handling Ltd is currently building emergency bunker storage to house 4 million tonnes of excess grain. Australian farmers too are eyeing high storage levels as they wait for prices to improve.
There could be a silver lining for Aussie producers with higher grade proteins however, as global stocks are currently lower protein and stock feed grades.
"Protein premiums on multigrade contracts are currently at conservative levels, and will likely increase during harvest," Whitelaw said.
"But once traders get their fill for blending purposes on export vessels we may see premiums fall rapidly."