January 4, 2011

 

Australia's floods likely to disrupt grain transport for weeks

 

 

Floods in Australia's Queensland could interrupt grains supply for weeks, top grains handler GrainCorp Ltd said Monday (Jan 3).

 

Even ahead of the latest deluge, Australia's wettest spring on record had damaged the crop quality in the world's fourth largest wheat exporter, stoking supply concerns and pushing up global wheat prices. US wheat futures <Wc1> rose more than 1% in early Asian trade on Monday (Jan 3).

 

"We are unable to move anything by rail or, of course, road," said David Ginns, corporate affairs manager at GrainCorp, adding that transport of grain to port elevators from inland areas had effectively ceased, and the domestic distribution network had also been impacted.

 

Queensland floods have renewed concerns over wheat supplies, after large volumes of prime quality crop was damaged by rains at the end of 2010. The state would likely account for around one million tonnes, or about 5% of the country's total output this year, according to Ginns.

 

Crop analysis firm Australian Crop Forecasters expects a total harvest of 24.4 million tonnes, compared with 21.7 million tonnes last year. But it has predicted that 10 million tonnes of this would be downgraded from milling wheat to grains fit for animal feed in Australia, which typically produces little feed-quality wheat.

 

CBOT wheat posted its first yearly gain in three years, rising 47% in 2010, erasing the 42% combined loss for 2008 and 2009 when ample global supplies weighed on prices.

 

Prices started surging last summer after a drought in Russia and the Black Sea region decimated the crop there and shut off exports. In recent months, wet weather in Australia and dryness in US wheat areas have raised fears over supplies.

 

Large parts of Australia's coastal northeast have disappeared under floodwaters in a spreading disaster that has brought some of the highest floods on record and forced thousands from their homes.

 

Asked how long it would be before the situation returned to normal, Ginns said, "It is going to be a matter of weeks. You don't know what damage has occurred until water goes away and then you inspect."

 

"We can't move anything by rail, full stop. We have either got trains that are marooned out in western areas and cannot come to the coast, or trains that are on the coast and cannot go to the west," Ginns added.

 

Still, there was unlikely to be any major impact on stored grains, he said, as much of the grains in affected areas were stored in bunkers, surrounded by tarpaulins secured in "gas-tight" ways, which also rendered them fairly waterproof.