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Wheat Futures Decline as Australia Boosts Production Forecast to a Record

Wheat rose to a four-month high in Chicago as Australia, forecast to be this year’s fourth-largest shipper, cut its export estimate. The grain reached the highest price in more than 2 1/2 years in Paris.

Wheat exports from Australia may be 16 million metric tons, compared with an earlier estimate of 18.4 million tons, the Australian Bureau of Agricultural & Resource Economics & Sciences said today. Rainfall delayed harvesting and reduced the crop’s quality.

“Australia’s wheat-quality outlook is deteriorating dramatically,” Alexander Bos, an analyst at Macquarie Bank Ltd. in London, said in an e-mailed report today. “Recent flooding will likely to lead to an overall wheat crop-production downgrade due to higher abandonment.”

Wheat for March delivery rose 13.25 cents, or 1.7 percent, to $8.0625 a bushel at 1:14 p.m. London time on the Chicago Board of Trade. The grain touched $8.095, the highest level for a most-active contract since Aug. 6, and advanced for a fifth session.

Milling wheat for January delivery traded on NYSE Liffe in Paris climbed 1.2 percent to 238 euros ($318.66) a ton. Prices reached 242.50 euros, the highest since April 2008.

More rain may fall in eastern Australia in the next 10 days, Bos said. As much as 35 percent, or 5 million tons, of the east coast wheat crop may be downgraded to feed quality, Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, wrote in a report on Dec. 5.

Export Forecast

The bank, which estimates the national crop at 22.3 million tons, cut its export forecast to 14 million tons from 16 million tons. The full scope of quality losses will only be determined when more crops are collected, the bureau said.

Wheat has jumped 68 percent since the end of June as drought destroyed grain in Russia, floods harmed fields in Canada, and dry weather in the U.S. Great Plains reduced the outlook for winter crops. The U.S. is forecast to be the top exporter in the 2010-2011 season, ahead of the European Union, Canada and Australia, the U.S. Department of Agriculture says.

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

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

Corn for March delivery rose 7.75 cents, or 1.4 percent, to $5.7575 a bushel in Chicago. Soybeans for January delivery added 14 cents, or 1.1 percent, to $13.025 a bushel.

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

“In Brazil, dry conditions are hurting the development of soy, particularly in Mato Grosso, where plots have been replanted with cotton,” Paris-based farm adviser Agritel said in a market comment. “That is supporting soybean prices.”

To contact the reporters on this story: Jae Hur in Tokyo at jhur1@bloomberg.net; Tony C. Dreibus in London at tdreibus@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter@bloomberg.net.

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