November 15, 2011


Australia's wheat crop experiences quality risks


Australia's wheat harvest for 2011/12 is facing the risk of quality downgrades due to wet weather but overall quality is expected to improve as compared to last year, Cargill Inc's Australian grain marketing chief said.


"We've still got a fair way to go so at this stage there doesn't seem to be too many problems in eastern Australia although in Western Australia there's been a few issues," Mitch Morison, commercial general manager of Cargill's Australian grain trading arm, said in a telephone interview.


Independent forecasters are predicting that Australia, which this year over took Russia, to become the world's third-largest wheat exporter, could reap a crop approaching the record 26.3 million tonnes harvested in 2010/11.


Global commodities giant, Cargill, is one of Australia's largest grain exporters, having this year acquired the grain trading arm of AWB Ltd, the former Australian Wheat Board, which was taken over by Canada's Agrium Inc in a US$1.2 billion deal.


Morison estimated around 10% of Australia's 2011/12 harvest had been completed but protein levels had been lower-than-normal following a wet spring which promoted plant growth at the expense of quality.


"Protein levels will be lower but overall quality will hopefully not be as bad as last year," he said.


In 2010/11, around one-third of eastern and southern Australian crops were downgraded to feed quality because of damage caused by rain during the harvest


In Western Australia, drought cut production to 4.4 million tonnes in 2010/11 compared to a nine million tonnes harvest expected this season.


Morison said Australia's top-grade high protein wheat crop would again fall short of a normal year's harvest of at least one million tonnes.


Most of Australia's high protein Australian Prime Hard wheat is grown in Queensland and northern New South Wales states in the continent's east where harvesting is well advanced.


"The biggest concern is probably protein...the protein in the wheat in Queensland is lower than historically we would have suggested so that adds to a global shortage of high protein wheat," said Morison.


"As result there's probably been a bit of short-covering and that's driven premiums (for prime hard wheat) up," he added.


He said APH was trading around AUD350-360 (US$356-366) per tonne free-on-board, representing around a US$100 premium to Australian Premium White (APW) milling grade wheat.


"That's the pretty big number and reflects the global shortage," said Morison, adding that the situation was unlikely to change until next year's northern hemisphere harvests.


He said this year at best 700,000 tonnes of "true" prime hard wheat would be harvested in Australia but the harvest could fall below 500,000 tonnes.


"Consistently you can find homes for around 700,000 tonnes of it (APH) so currently we're seeing price rationing," said Morison.


He said it was likely APH's premium over APW would slim as harvesting progressed and a better picture of the crop's protein profile emerged.

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