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Published January 27, 2014, 10:33 AM

Australian wheat, beef and sugarcane at risk from drought

Drought and high temperatures are pounding parts of Australia, one of the world’s leading exporters of wheat, beef and raw sugar.

By: Jonathan Knutson , Agweek

Drought and high temperatures are pounding parts of Australia, one of the world’s leading exporters of wheat, beef and raw sugar.

But Australian weather problems aren’t expected to have much effect on U.S. prices of the three commodities, say experts who talked with Agweek.

The following is a look at each of the three commodities:

Wheat

Australian wheat farmers have harvested their 2013 crop, which enjoyed good yields, says Jim Peterson, marketing director for the North Dakota Wheat Commission.

Australia, the world’s second-leading wheat exporter, is in the Southern Hemisphere, where the growing season normally is opposite that of the Northern Hemisphere. But Australian wheat’s growing season is similar to that of spring wheat in the Upper Midwest, with Australian farmers planting wheat in April and May and harvesting it in October and November.

If drought continues, however, planting conditions for the 2014 Australian wheat crop would suffer. If so, that could hurt yields and potentially mean less Australian wheat to compete with U.S. wheat for exports in southeast Asia, Peterson says.

But it’s much too soon to make any predictions about the size of Australia’s 2014 wheat crop, he says.

Bryce Anderson, senior ag meteorologist with DTN, notes that Australia typically receives much of its annual precipitation during its fall (spring in the Northern Hemisphere). If normal weather patterns hold true, much of the country should receive substantial rains in the next few months.

“I’m not ready to write off Australia,” he says.

Anderson also notes that western Australia, the country’s key wheat-for-export producer, is in relatively good shape for moisture.

Beef

Australia is the world’s third-largest beef exporter, with most of it lower-grade processing beef. The U.S. is a major importer of lower-grade beef. The combination might lead to the conclusion that drought in Argentina, which is hurting many livestock producers, will impact U.S. beef prices.

But that’s not the case, says Tim Petry, North Dakota State University Extension Service livestock marketing specialist.

“Any impact on U.S. beef prices will be negligible,” he says.

Australian beef exports increasingly go to China, which is importing rising amounts of beef to improve the diet of its fast-growing middle class, Petry says.

Because of greater demand from China, Australia has been sending less beef to the U.S. That reduces the impact of the Australian drought on U.S. beef prices, he says.

Sugar

Australia, which raises sugarcane, is the world’s third-ranking sugar exporter.

Typically, Australia begins harvesting sugarcane in June, according to the website of the World Association of Beet and Sugarcane Growers.

As of early January, Australian sugarcane growers were optimistic for a good harvest, provided “thirsty crops get a much-needed drink soon,” according to the website of Canegrowers Australia, which represents about 80 percent of the country’s sugarcane growers.

Drought is a particular concern in Queensland, a key sugar-producing state in northeast Australia.

But it’s unlikely that depressed U.S. sugar prices will rally even if problems worsen in Australia, officials say.

Any decrease in Australian sugar production most likely would be offset by an excellent harvest in India, the world’s fourth-leading sugar exporter, says William Hejl, an Amenia, N.D., sugar beet farmer and a past president of the World Association of Beet and Sugarcane Growers.

For now, at least, reports don’t show a major change in Australian sugar production from a year ago, says David Berg, president of Moorhead, Minn.-based, American Crystal Sugar.

Jack Roney, director of economics and policy analysis for the American Sugar Industry in Arlington, Va., doesn’t see much, if any, impact on U.S. sugar prices.

Australia has the fourth-largest share among the 40 countries that have quotas to export sugar to the U.S., Roney says.

“Australia normally fills its quota, which is at least 87,000 metric tons per year — higher when we need the sugar. Even with reduced production, it is likely Australia would send its usual amount of sugar, as long as the U.S. price provides a medium premium to selling their sugar onto the world market” — a premium that now exists, Roney says.

To help U.S. sugar growers, an Australian drought would need to be so damaging that it boosts world sugar prices, he says.

Though Australia is the world’s third-largest sugar exporter, its annual sugar exports are dwarved by those of Brazil, Roney says.

Australia averaged 3.1 million metric tons of sugar exports annually in the past five years. That’s only one-eighth as much as the 24.8 million metric tons of sugar exports averaged annually in the past five years by Brazil.

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