Wheat-Crop Quality in Australia's Queensland Is Hurt by Rains, Growers Say

More than half of the wheat crop from Australia’s Queensland state may deteriorate to feed grade following heavy rain, tightening milling-quality supplies and potentially helping to extend a rally in prices.

“There is a lot of downgrading of quality because of the persistent wet weather,” Wayne Newton, grains president of Brisbane-based farm group Agforce, said today. The northern state may produce 1.6 million metric tons in all this season, according to a September forecast from the government.

Wheat surged 7.2 percent yesterday on concern that downgrades and delays to the crop from Australia, the fourth- largest shipper, may curb supply of high-quality grain. There was “a little bit of panic” in the market, according to Austin Damiani, a floor broker at the Minneapolis Grain Exchange.

In Queensland, there’s “a lot of frustration among the growers,” said Newton, who estimated that “well over 50 percent” of the state’s wheat crop will be cut to feed grade.

Wheat advanced 0.7 percent to $7.45 a bushel on the Chicago Board of Trade at 5:00 p.m. in Singapore, erasing an early decline. The price has surged 38 percent this year on tightening global supplies, including an export ban from Russia following a drought. Futures peaked this year at $8.68 in August after Russia announced the ban.

‘In Short Supply’

High-quality wheat may be “in short supply” in the 2010- 2011 season after rain hurt crops in Australia and Europe, and dry weather curbed production in Russia, forecaster Gail Martell said yesterday. “Very wet conditions in Australia have bogged down the harvest while threatening crop quality,” Martell said.

Australia’s wheat production may reach 22.3 million tons this season, with the three eastern states of Queensland, New South Wales and Victoria producing a record 14.1 million tons, Commonwealth Bank of Australia forecast this week. On average, 15 percent of the national crop was used for feed in the five crop years to 2008-2009, according to government data.

Australia had its wettest September-to-November spring on record this year, according to the Bureau of Meteorology. In New South Wales, the largest producing state, as much as 30 percent of the crop may be downgraded, Peter Matthews, cereals technical specialist at Industry & Investment NSW, has said.

‘Badly Affected’

“It is pretty well unprecedented to see the whole eastern seaboard being really badly affected by wet weather at this time of year,” Pete Mailler, chairman of Grain Producers Australia, a national industry group, said by phone today. Half the eastern states’ crop may be at risk of damage if rain continued, he said.

Harvesting in eastern Australia starts in Queensland and moves south through New South Wales, Victoria and South Australia. Less-mature crops in the south are less susceptible to downgrading, Chris Sounness, grains project manager at Victoria’s Department of Primary Industries, said yesterday.

The effect of rain on grain in South Australia wouldn’t be known until volumes started coming into the system, Viterra Inc. Executive Manager Grains Dean McQueen said in a statement today.

“While the recent rain is expected to impact on the quality of South Australia’s crop, the volume is still there,” he said. Demand for shipping from the company’s ports was also strong, he said.

The Australian Bureau of Agriculture and Resource Economics and Sciences, which in September forecast a crop of 25.1 million tons, will release its next report on Dec. 7.

Milling wheat for January delivery on the Australian Securities Exchange surged 11 percent to A$307 ($296) per ton today. One week ago, on Nov. 25, the contract was at A$254.50.

To contact the reporter on this story: Wendy Pugh in Melbourne wpugh@bloomberg.net

To contact the editor responsible for this story: James Poole at Jpoole4@bloomberg.net

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