Australian Floods Prompt Cuts in Wheat Export Forecasts, Cause Evacuation

Authorities in Australia ordered evacuations in the nation’s most-populous state and warned of crop damage as rains and floods swept the east coast, prompting Commonwealth Bank of Australia to cut its wheat exports forecast.

Residents of three New South Wales communities were told to leave as a nearby river was predicted to reach “major flood level” last night, the State Emergency Service said. The body of an 81-year-old man was recovered Dec. 4 in the northern state of Queensland after the deluge swept away his vehicle.

Commonwealth Bank cut its estimate of wheat exports to 14 million metric tons in 2010-2011, from an earlier 16 million tons. “Many in the industry suggest the disruptions to the harvest this year and the implications for grain quality, are the worst in a lifetime,” Luke Mathews, a commodity strategist at the bank, said in a report yesterday.

Lower shipments may drive up wheat prices as the U.S. Department of Agriculture forecast a 22.9 million-ton shortfall in global production this season, the first deficit in three years. The deluge in Australia, part of a La Nina event that cools the Pacific Ocean and increases rainfall, helped drive wheat futures 13 percent higher in Chicago last week.

New South Wales Emergency Services Minister Steve Whan said at the weekend rains are likely to affect grain quality for crops such as wheat, barley, canola, chickpeas and lupins. He estimated A$500 million ($497 million) was wiped off the state’s forecast A$3.2 billion winter harvest.

ABARE Report

The Australian Bureau of Agricultural and Resource Economics, in a report due on Dec. 7, may lower its estimate of the nation’s harvest from 25 million tons and pare its forecast on exports from 18 million tons, Commonwealth’s Mathews said.

“Australia is traditionally a producer of quality milling wheat,” he said, referring to the grade used for food including bread, pasta, and noodles. The rains may lower the quality of 6 million tons of milling wheat produced in the east coast, with as much as 35 percent of the harvest, or 5 million tons, at risk of being classified as feed-quality, he said.

Floods have begun to ease in Queensland and the southern state of Victoria, local emergency services said. Victorian farmers are now facing a swarm of locusts that the state Department of Primary Industries says could be the worst plague in 75 years.

Swarms have been reported at Charlton, Echuca, St Arnaud, Quambatook and Wycheproof, with some stretching up to 25 kilometers (16 miles), the department said.

State Locust Director Stephen Nee said the swarms have the potential to move quickly into other areas.

Swarms ‘Unpredictable’

“Locust swarms can be unpredictable, but with warmer weather forecast in the state’s north this weekend, it’s expected that greater numbers of locusts may start to fly,” he said in a statement. “We urge motorists to take care as swarms can impact on visibility when driving.”

Australia’s agricultural industry expanded 18.5 percent last quarter, driven by “strong crop forecasts,” the Bureau of Statistics said last week in a report that showed the economy expanded 0.2 percent from three months earlier. That was the worst performance since a contraction at the end of 2008.

Mick Keogh, executive director of the Australian Farm Institute, said that if the data “for agriculture were corrected for the loss of value in the crop sector due to the rain, it is highly likely Australia would have experienced negative change in GDP for the quarter,” The Australian newspaper reported on Dec. 4.

To contact the reporters on this story: Michael Heath in Sydney at mheath1@bloomberg.net; Luzi Ann Javier in Singapore at ljavier@bloomberg.net.

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net

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