Wheat Climbs to Four-Month High as Australia Cuts Export Estimate on Rain

Wheat advanced to a four-month high in Chicago as Australia cut its export forecast after heavy rains delayed the harvest and reduced grain quality.

Wheat for March delivery increased for a fifth day, gaining as much as 2.1 percent to $8.095 a bushel, the highest level for a most-active contract since Aug. 6, before trading at $8.04 at 10:50 a.m. Singapore time.

Australian output may be 26.8 million metric tons in the 2010-2011 season, compared with a September prediction of 25.1 million tons, the Australian Bureau of Agricultural & Resource Economics & Sciences forecast today in a report. Exports may be 16 million tons, compared with the previous estimate of 18.4 million tons.

“Less supply from Australia may increase demand for the U.S. crop,” Toshimitsu Kawanabe, an analyst at Tokyo-based commodity broker Central Shoji Co., said today.

Prices have jumped 68 percent since the end of June as drought sapped Russian supplies, floods harmed fields in Canada, and dry weather in the U.S. Great Plains eroded the prospects for winter crops. The U.S. is forecast to be the largest wheat exporter in the 2010-2011 season, followed by the European Union, Canada and Australia, according to the U.S. Department of Agriculture.

Lower shipments from Australia may drive wheat prices higher as the USDA forecast a 22.9 million-ton shortfall in global output this season, the first deficit in three years.

Crop Downgrade

Wheat-growing areas in eastern Australia may get more rain this week than the region usually receives in the whole of December, extending floods that have already damaged crops, Mike Tannura at T-Storm Weather said yesterday.

As much as 35 percent, or 5 million tons, of the east-coast wheat crop could be downgraded to feed quality, Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, wrote in a report on Dec. 5. The bank, which estimates the national crop at 22.3 million tons, cut its export forecast to 14 million tons from 16 million tons.

Corn for March delivery rose 0.4 percent to $5.70 a bushel, while soybeans for January delivery were little changed at $12.8775 a bushel.

Brazil will harvest 66.78 million tons of soybeans in the year that starts Feb. 1, down from 68.7 million harvested a year earlier, the USDA’s Foreign Agricultural Service said yesterday in a report. Soybean exports may fall to 30.2 million tons, compared with 30.5 million a year earlier, the agency said.

Argentina’s soybean output may drop to 52 million tons in the year starting April 1, from an earlier estimate of 54.5 million tons, the USDA said in a report. Exports may drop to 11.5 million tons from 14.7 million tons, the report said.

The U.S. is forecast to be the largest soybean supplier in 2010-2011 followed by Brazil and Argentina, according to the USDA.

To contact the reporter on this story: Jae Hur in Tokyo at jhur1@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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