March 8, 2012

 

Australia cuts wheat export estimate on lower yield

 

 

Australia reduced hopes for its wheat sector, cutting its forecast for 2011-12 exports and projecting an output and price decline next season, as it unveiled speculations of a lower world crop in 2012-13.

 

Abares, Australia's official commodities bureau, pegged Australian wheat exports this season at 21.2 million tonnes, down 1.2 million tonnes below an estimate released last month, if still enough to smash a 15-year-old record of 19.2 million tonnes.

 

While the bureau declined to reveal the reason for the downgrade, it follows market concerns over the ability of Australian infrastructure to cope with such huge volumes, on top of booming exports of some other crops, such as rapeseed, and of hard commodities such as coal and metal ores.

 

The Canadian Wheat Board two weeks ago highlighted the role of "logistical bottlenecks and the availability of open shipment windows" in determining Australia's grain export pace, while malting barley consultancy RMI Analytics warned that "Australian port facilities will reach their limits this year".

 

Australian shipping arrangements which force merchants to apply for slots well in advance of the shipping period "seem not very helpful" for maximising use of terminals, Swiss-based RMI said.

 

Abares' downgrade came as it forecast a decline of 11 million tonnes to 682 million tonnes in world wheat production in 2012-13, in line with the 680m-tonne estimate from the International Grains Council last month.

 

The bureau's forecast factored in a drop of 13.0% to 25.7 million tonnes in the Australian harvest, as yields return to average levels, after two seasons boosted by generally ample rains.

 

Sown area will drop 358,000 hectares "as the forecast prices for wheat, relative to other major crops, become less favourable", although farmers may try to recoup some of the price drop by applying more nitrogen fertilizer, to improving protein levels and tap into premiums for quality grain.

 

India and drought-hit Ukraine will also reap smaller harvests, as will Kazakhstan, whose wheat crops was pegged at 16 million tonnes, down 31% on last year's., which enjoyed "exceptionally favourable" weather.

 

These falls will more than outweigh rises expected in the Canadian and EU crops, both set for 2% production increases, a 5% boost expected to Russia's crop, and 6% growth in the US.

 

The US crop will reach 58 million tonnes (2.131 billion bushels) "as a result of larger areas harvested and a return to average yields following poor 2011-12 seasonal conditions", Abares said.

 

"Forecast higher production from the southern US states is expected to lead to an increase in higher protein wheat supplies in 2012-13."

 

Nonetheless, the Abares estimate is 34 million bushels (925,000 tonnes) short of an USDA forecast made two weeks ago.

 

Even the reduced world wheat crop next seasons will be just enough to beat consumption, helping world inventories end 2012-13 at a record 210 million tonnes.

 

The extra supplies will foster a 7% decline, to US$275 a tonne, in the average price of hard red winter wheat, as traded in Kansas, next season.