The increased output may help meet stronger global demand from buyers after Russia banned exports last month because a drought hurt crops, driving prices to the highest level in almost two years. AWB Ltd., Australia’s largest exporter, has reported “very strong interest” in the nation’s wheat.
“If this crop does materialize, it certainly has the ability to boost the global supply,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, said from Sydney by phone.
Wheat futures in Chicago, which touched $8.68 a bushel after the Russian ban was announced, traded 0.4 percent lower at $7.42 at 2:44 p.m. in Singapore, reversing an earlier gain of as much as 0.7 percent. Wheat has rallied 63 percent over the past year, beating the performance of corn and soybeans.
Export Projection
Australian wheat production may be the largest since 2005- 2006’s 25.15 million tons and the third-highest amount on record, according to bureau data. Output reached an all-time high of 26.1 million tons 2003-2004. Exports may be the highest since 19.2 million tons were shipped in 1996-1997.
La Nina weather conditions are bringing above-average rainfall to parts of Australia’s east, boosting winter-crop output even as dry weather cuts the harvest outlook for the country’s west. The weather event may persist into early 2011, Australia’s Bureau of Meteorology said on Sept. 1.
Mitch Morison, AWB’s general manager commodities, said on Sept. 7 that there was stronger interest in the nation’s harvest “to make up for the lost volume in the global trade.” CBH Group said the same day that shipments from Australia will continue at high levels after jumping in July.
Emerald Group Australia Pty, a grain trader half-owned by Sumitomo Corp., said last week that it’s started to sell wheat from the next harvest, according to Chairman Alan Winney. There was “significant interest” in shipments, Winney said.
Graincorp Stock
GrainCorp Ltd., eastern Australia’s largest grain handler, gained 4.6 percent to A$7.45 on the Australian stock exchange, the highest close since Sept. 30.
To be sure, there may be logistics constraints around shipping from the east, while the output estimate had been cut for the export-focused state of Western Australia, Mathews said. “Total supplies available to the world market may not be as large as what the headline figure would indicate,” Mathews said.
Insufficient rail-freight capacity in the east to transport the increased crop to port may cap Australia’s total exports at about 15.5 million tons, said Wayne Gordon, Rabobank Groep NV agricultural commodities analyst. “Effectively what it means is that stocks will build in Australia,” he said today.
Russia’s grain crop stood at 49.7 million tons, 32 percent less than a year earlier, Interfax reported Sept. 13, citing Agriculture Ministry data. The ban on grain and flour exports will last at least until next year’s crop is harvested, Prime Minister Vladimir Putin said on Sept. 2.
Grains Outlook
Australia’s total production of so-called winter crops, including wheat, barley and canola, may climb to 40.7 million tons this season, the third-largest on record, up from a June outlook for 35.1 million tons, according to the report. Canola output this season is forecast at 2.2 million tons and barley is expected to be 8.8 million tons, the bureau said.
“New South Wales has the prospect of achieving some of the highest yields in 10 years and, combined with a high area cropped, is expected to drive the increase in national production,” Paul Morris, deputy executive director at the bureau, said in a statement.
Risks to the outlook in the east include locust damage and reduced yields because of stripe rust even as there is potential for larger-than-expected output, the report said. Australian wheat is mostly harvested from October to early January.
Source: Bloomberg
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