Australia Rains Will Cut Wheat Exports, Commonwealth Bank Says

From Businessweek and @the10virgin:

Dec. 5 (Bloomberg) -- Wheat exports from Australia, the world’s fourth-largest shipper, will be curbed as heavy rains and floods damage crops, the Commonwealth Bank of Australia said.

The bank, in a report issued today, cut its forecast for exports to 14 million metric tons in the 2010-2011 season, from an earlier estimate of 16 million tons. Australia shipped 14.6 million tons of wheat in the previous two seasons, said Luke Mathews, a commodity strategist at Commonwealth Bank.

“Many in the industry suggest the disruptions to the harvest this year and the implications for grain quality, are the worst in a lifetime,” Mathews said in the report. “Wheat producers will sell a greater proportion of their crop directly to the local stock-feed sector. This implies less grain will enter the bulk handling system as envisaged last month.”

Smaller shipments from Australia may drive up prices as the U.S. Department of Agriculture forecast a 22.9 million-ton shortfall in global production this season, the first deficit in three years. Rains are damaging Australia’s wheat crop after Russia’s worst drought in at least half a century slashed this year’s harvest in the world’s third-largest grower last season.

Wheat futures rallied 13 percent last week in Chicago on concern the rains in Australia and dry weather in growing areas in the U.S., the world’s largest shipper, will further curb global production of the grain.

The Australian Bureau of Agricultural and Resource Economics, in a report due on Dec. 7, may lower its estimate of the nation’s harvest from 25 million tons and pare its forecast on exports from 18 million tons, Mathews said.

“Australia is traditionally a producer of quality milling wheat,” he said, referring to the grade used for food including bread, pasta, and noodles. The rains may lower the quality of 6 million tons of milling wheat produced in the east coast, with as much as 35 percent of the harvest, or 5 million tons, being classified as feed-quality, he said.

Rains were forecast in the next seven days, which may delay harvest in most of the east coast planted areas by at least a month, Mathews said.

--Editors: Michael Heath, Paul Tighe