April 8, 2011

 

Australian wheat exports to increase due to high feed demand

 

 

Australian wheat exports will continue to be strong in the next few months due to a buoyant global market for feed grains, according to analysts.

 

Late rains and flooding in key wheat growing areas had led to a higher proportion of Australian wheat being downgraded to feed grade this year, but exporters are finding strong demand for feed grain amid tighter supply of US corn.

 

"Australian feed wheat is well priced and is being exported as fast as we can put it out the door," said a trader. The key challenge is transporting the wheat from upcountry silos to coastal export terminal, he said.

 

"Wheat is competing well with corn and we expect to see continued strong demand for Australian wheat," he said.

 

Favourable seasonal conditions in the last crop year ended March 31 and Australia produced 42.1 million tonnes of grains from the winter crop, its second-biggest output on record. Wheat accounted for 62% of that, at a record 26.3 million tonnes.

 

After annual domestic demand of about six million tonnes is met, the balance is available for exports, making Australia a key supplier in the global market.

 

According to the Australian Bureau of Statistics, the country's February wheat exports rose 3.4% on month to 1.81 million tonnes, registering a 47% increase from the same month last year. Wheat exports from October to February, the first five months of the current marketing year, rose 41% to 7.37 million tonnes.

 

Domestic consumption and exports together reached 9.72 million tonnes in the first five months, a 27% increase from last year, the Bureau said.

 

If wheat shipments continue at the current pace through the rest of the marketing year, total shipments could reach nearly 18 million tonnes, valued well in excess of AUD5 billion (US$5.27 billion), making wheat Australia's most valuable farm export.

"The challenge for Australia this year is whether we remain competitive in the second half when you have got new crop European and Northern Hemisphere wheat coming on," Burt said.

 

Exporters are already offering massive price discounts on European wheat for September delivery, compared to that for current delivery, he said.

 

An analyst said exports will need to stay high in the coming months in order to chew through that huge harvest that Australia realised over the past few months.

 

The extremely tight global feed grain situation is providing opportunities for exporters that Australia otherwise would not have had, particularly at the prices now being realised, the analyst added.

 

"Foreign demand for Australian feed grains is very strong," he said. "We continue to hear of Chinese interest in Australian feed wheat and the exports statistics that we have seen back up that story."

 

The Australian grains sector is facing an optimistic year largely because of the exceptional global demand profile which in turn is created by a shortage of feed grains in other parts of the world, primarily US corn, which is trading just shy of all-time highs, he said.