Dryness set to shrink Australia's 2025/26 wheat output by 16%, poll shows

By Naveen Thukral

SINGAPORE, April 1 (Reuters) - Australia's wheat production is likely to drop by 16% in the year starting July 1 from the previous year's bumper crop as dryness in some regions reduces soil moisture, pulling forecasts in line with historical averages, traders and analysts said.

Farmers in the third-largest wheat exporter are poised to start planting this month against a backdrop of tightening world supplies that are expected to support prices Wv1.

While top producing states New South Wales and Western Australia have ample soil moisture, growers in Victoria and South Australia are likely to struggle with severe dryness, traders and analysts said.

"There is no sub-soil moisture across Victoria or South Australia. Last year they had very little in crop rain but at least we had sub-soil moisture going into planting," said Stefan Meyer, head of a grains trading team at Sydney brokers StoneX.

"This year's crop potential is looking around average or just above average and the market is telling us there is a problem."

Prices of feed wheat in the spot market have jumped to A$385 ($241) per ton for June delivery in Adelaide, from $355 a ton since the harvest in November, he said, even as Chicago futures have eased in 2025.

Australia is likely to produce 28.6 million metric tons of wheat in 2025/26, an average of five analysts and traders polled by Reuters shows, down 16.1% from 34.1 million a year earlier. Forecasts range between 27 million and 30.752 million tons.

In March, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) estimated wheat output at 30.5 million tons in 2025/26.

"Victoria and South Australia have been completely dry for months now," said Melbourne-based Palwinder Singh, of grains and oilseeds trading company Marina Commodities.

"There could be improvement if we see some rains in the next one to two months, but for now we are forecasting around 28 million tons of wheat output."

Forecasts for lower wheat output in Australia, a key supplier to Asian importers including China and Indonesia, come as the U.S. Department of Agriculture estimates world wheat inventories to drop to their lowest in nine years, at 260.08 million tons by the end of June.

"We expect (global) prices to rise higher from current levels through the course of 2025 due to a tightening of supplies going into the 2025/26 season," BMI Research, a unit of Fitch Group, said in a note.

Top wheat exporter Russia is forecast to reduce overseas sales in the first half of 2025.

Excessive rains over the past week in New South Wales and Queensland could also pose a challenge for farmers, StoneX's Meyer said.

"Parts of New South Wales and Queensland have had up to 200 mm (8 inches) of rain in the last 7 days, with many paddocks looking like a lake, and the next challenge in those areas now is being able to get machines on the fields to plant the winter wheat and barley."

($1=A$1.5977)