Wheat Sales From Australia to Get `Very Strong Start' on Russia, AWB Says
Wheat shipments from Australia’s next harvest will probably begin at a rapid pace as dry weather cuts Russian production, said AWB Ltd., the nation’s largest exporter of the food grain.
“Given the current market conditions we would expect a very strong start,” AWB Trading Manager Tim Hutchison said in Melbourne by phone today. The marketing year starts Oct. 1.
Wheat soared to the highest level in 23 months as a heat wave in Russia and dry weather in Kazakhstan, Ukraine and parts of Europe cut production. Australia’s export program accelerated after a slow start caused by a surplus and competition from Black Sea countries and Germany, Hutchison said. CBH Group said today there was “plenty of demand” in the Australian region.
“We have picked up certainly from the pace we would have expected several months ago and that will continue to ramp up,” he said. Buyers purchasing wheat according to price were more likely to turn to Australia, he said.
Wheat for December delivery, the contract with the largest open interest, jumped as much as 3 percent to $7.7825 a bushel in Chicago, the highest level since September 2008. The price touched $4.255 in June. ASX Ltd.’s January-delivery Western Australia wheat futures contract traded at A$304.10 ($278) a metric ton at 5:33 p.m. Melbourne time.
Uncertainty over Russian export policy and supplies from other shippers including Australia and Argentina would help underpin prices, Hutchison said.
Big Pull-Back Unlikely
“It’s a question of trying to get some of the uncertain questions answered,” he said. “Until that occurs it is going to be difficult to have major pull-backs in the market, although when we are moving at the rate we are, you can certainly expect some steep corrections,” he said.
Wheat buyers are seeking supplies from Australia as drought slashes production from the Black Sea region, CBH said today.
“Basically that whole region was awash with wheat for the last 18 to 24 months and there was plenty” on the global market, Tom Puddy, wheat marketing manager for Perth-based CBH Group’s export division, said by phone today. “With the prices rallying so much now, a lot of the users are sort of in shock.”
Shares in AWB, which has agreed to a takeover by GrainCorp Ltd., gained 5 percent to A$1.06 at the 4:10 p.m. local time close on the Australian stock exchange.
AWB was “comfortable” with market forecasts for an Australian wheat crop of about 22 million tons, Hutchison said.
“There are some uncertainties in the west but the east is also looking potentially stronger,” he said. “It is highly unlikely we could get into a severe crop problem like we had several years ago.”
Australian 2010-2011 wheat exports are forecast at 15.5 million tons up from 14.5 million tons in the current year, according to the U.S. Department of Agriculture.
To contact the reporter on this story: Wendy Pugh in Melbourne wpugh@bloomberg.net.
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