September 10, 2007

 

Wheat crop devastation may push Australia to import US corn

 

 

The destruction of wheat fields in Australia due to drought may provoke the country to import US corn to comply with the demand for animal feed market.

 

More than a hundred thousand tonnes of US corn was expected to be imported soon, according to Col Lethbridge of market advisory service MarketAgTrader on September 7.

 

Wheat futures soared to a record high of A$423 a tonne on Wednesday on the Australian Stock Exchange, before falling to A$389 a tonne on Thursday on a forecast of heavy rain for next week.

 

Garry Booth of Man Financial said world wheat supply is in the verge of breakdown as rains in Australia -- the world's second biggest exporter of wheat -- have not poured down. He warned that if it doesn't rain in the next two weeks, most of eastern Australia's grain crops will be gone.

 

This would be the third time in five years that Australian wheat has been decimated by drought.

 

Australia's worst drought in 100 years cut the 2002/03 crop by 60 percent to just 10 million tonnes. The same drought re-emerged last year to chop the 2006/07 crop to 9.8 million.

 

This year the apparent end of the drought produced early forecasts of a record 26 million tonnes wheat crop. But the return of drought in August, particularly in the past two weeks, has cut the crop to less than 20 million tonnes, with most forecasts now around 16-18 million tonnes and some pessimistic forecasts as little as 14 million tonnes.

 

US corn imports this year would be only the second time since colonial times 200 years ago that Australia has been forced to import significant amounts of corn or wheat.

 

The 2002 drought triggered imports of 476,000 tonnes of corn and wheat from Britain, Canada and the United States.

 

Private group Hunter Grain, which imported wheat from Britain in 2003, was one company keen to import animal feed, said Lethbridge, who is assisting negotiations on imports of corn.

 

Australian feedlots were closing down, he said.

 

However, at this period, there will be no wheat imports from Britain this time because of high wheat prices, Lethbridge said.

 

Imports of soymeal from Argentina and US are also possible, Lethbridge said. The Australian government have issued permits in June for the import of soybeans and sunflower seed from South America.

 

Lethbridge said imports would be for beef cattle feedlots and also for pigs, dairy herds and large-scale chicken producers.

 

Imports of even 100,000 tonnes would make a difference, said Peter Howard of private trader OzEgrain.

 

Heavy rain forecast for the next 10 to 14 days, if it eventuates, could save the wheat crop sufficiently to ease some of the need to import, traders said.

 

But Booth points out that forecast rain is not assured and that rain forecast this time of year in 2006 failed to eventuate.

 

Lethbridge sees world prices rising to US$9.50 a bushel if it does not rain in the Australian wheatbelt in the next two weeks.