December 6, 2010

 

US wheat climbs to four-month high as Australian rains hurt crop

 

 

US wheat climbed to the highest price in four months on concern that unusually heavy rainfall in Australia will cut the harvest and reduce grain quality, curbing supplies, while corn and soy declined.

 

Wheat for March delivery advanced as much as 2.4% to US$7.98 a bushel, the highest level for the most-active contract on CBOT since August 6. It traded at US$7.93. Exports from Australia, the world's fourth-largest shipper, will be curbed as heavy rains and floods damage crops, said the Commonwealth Bank of Australia.

 

The bank cut its estimate for the Australia's wheat exports to 14 million tonnes in 2010-2011, from an earlier 16 million tonnes. "Many in the industry suggest the disruptions to the harvest this year and the implications for grain quality are the worst in a lifetime," an analyst said.

 

"Poor crop weather in Australia has pushed the market higher, increasing concern over tight global supply," another analyst said.

 

Futures have surged 65 % since June 30 as drought in Russia and floods in Canada cut output, while dry weather in the US Great Plains threatened winter crops. Heavy rains in Australia, caused by a La Nina weather event that cools parts of the Pacific Ocean, helped drive wheat futures 13% higher in CBOT last week.

 

Rains were forecast in the next seven days, which may delay harvesting in most of the east-coast planted areas by at least a month, a Commonwealth Bank analyst said. The Australian Bureau of Agricultural and Resource Economics, in a report due on December 7, may lower its estimate of the nation's harvest from 25 million tonnes and pare its forecast on exports from 18 million tonnes, Mathews said.

 

Lower shipments may drive up wheat prices as the USDA forecasts a 22.9 million-tonne shortfall in global output this season, the first deficit in three years.

 

The wet weather may cause more than 10 million tonnes of Australia's wheat crop to be downgraded to lower-protein classes and to feed quality, said another analyst. He estimates the total crop at 23.8 million tonnes.

 

Corn for March delivery dropped as much as 0.7% to $5.6975 a bushel in Chicago before trading at US$5.715. The price gained 3.7% last week, a second straight gain.

 

"We'll start to see corn rise in the coming days because obviously that battle for acres is very much prominent in the US," the analyst said. The US is the world's largest exporter of wheat, corn, and soy.

 

Soy for January delivery was little changed at US$12.995 a bushel. The contract gained 5% last week, the biggest rally since mid-October.