April 25, 2012

Australia's April wheat stocks down despite strong exports

A further decline in Australian wheat stocks in April was the result of an ongoing export programme that has seen strong take-up in recent months, Brian Dalitz, general manager for planning and marketing at Australia's fifth-largest wheat exporter, Emerald Group Australia, said Tuesday (Apr 24).

But competition in the international market is building up with new crop wheat from the Northern Hemisphere being priced very competitively. This could slow the draw-down in Australian stocks by the middle of the year, he said.

Australia has produced record wheat crops in two successive years, raising questions about the ability of the country's export logistics system to successfully ship out the grain by remaining competitive in what is a well-supplied global market.

The volume of Australian wheat stored by bulk handlers and grain traders in March fell by 2.03 million tonnes or 8.7% on month to 21.26 million tonnes, the government's Bureau of Statistics reported in its monthly stocks publication.

That, however, was below Emerald's expectations of a bigger stock draw-down, Dalitz said. In April, stocks could fall by a further 2-2.5 million tonnes, he said.

Emerald, half-owned by Japanese trading giant Sumitomo Corp. (8053.TO), has estimated March wheat exports around two million tonnes and predicts exports will hit 2.3-2.4 million tonnes in April. Official March wheat export data is scheduled May 9.

In February, the country exported a record 2.42 million tonnes of wheat. Dalitz said Australia has done a good job of exporting wheat December through April, consistently averaging more than two million tonnes a month, but the market will come under pressure with exports falling below two million tonnes in May and coming under more seasonal pressure from June.

"The front-end marketing year programme was always expected to do well and we've met that expectation, but we continue to look at the back-end and expect the draw down in stocks to slow" to 1.5 million tonnes a month, if not one million tonnes a month in October, he said.

Offshore markets are now pricing July and August delivery, with competition increasingly being seen from Northern Hemisphere exporters, he said. That would mean "on-year, we're still probably in line to build stocks, [although] not by a great deal," he said.

According official estimates, closing wheat stocks at the end of the last marketing year ended September 30 reached 8.25 million tonnes, a 61% gain on year.