February 13, 2009

Australia's biggest wheat exports within three years may hold up due to port obstruction after the country opened the market to multiple traders.

 

Bloomberg calculations reveal that at least 19 vessels are waiting to load grain from ports in Western Australia, the biggest exporting state. CBH Group , the state's biggest grain handler, told customers it can't take orders for February or March and temporarily halted April bookings, Colin Tutt, general manager of operations, said.

 

Farmers are rushing to sell wheat after Australia removed its monopoly export system last year and opened the market to 22 traders including Cargill Inc. and Glencore International AG. The congestion may force customers to seek grain from other nations and push up prices.

 

Mike Chaseling deputy chairman of commodity management and grain trader Emerald Group Australia Pty. in Melbourne said the shipping stem is locked down and farmers can't sell due to uncertainties of getting access to the port.

 

Wheat futures for March delivery gained 2.50 cents, or 0.5 percent, to A$5.4575 a bushel on the Chicago Board of Trade at 1:34 p.m. Sydney time. Australian milling wheat futures, up 6.8 percent this year, closed at A$298 a tonne yesterday.

 

The bulk of Australian wheat exports come from Western Australian ports, with Fremantle, Albany, Geraldton and Esperance shipping 62 percent of the nation's grain exports in the year ended June 30, 2008, according to the Ports Australia Web site.

 

The congestion in West Australian ports is unusual, said Alick Osborne, a director of the Australian Grain Exporters Association. For the companies with ships awaiting, there would be some exposure to demurrage, he said.

 

The Baltic Dry Index, a measure of commodity-shipping costs, has more than doubled this year. The index rose 4.1 percent to 2,055 points yesterday.

 

The congestion is because of limited capacity to move grain from farms to ports, a delayed harvest and the first year of deregulated wheat exports, the association's Osborne said.

 

He added that there is a "teething issue in terms of the traders in the market place managing the overall volume of sales to fit within the shipping capacity."

 

The Australian Grain Exporters Association's members include Cargill, Louis Dreyfus & Cie SA, Glencore and Nobel Group Ltd.

 

Western Australia has already shipped 2.5 million tonnes from the most recent total state harvest of 12.3 million tonnes, CBH's Tutt said.

 

Tutt added that they are targeting to ship 3 million tonnes from now through to the end of April, including a record or near record monthly tonnage next month.