Australian Feed Wheat Displacing Corn in Asia, Emerald Says

Australia, the fourth-largest wheat exporter, is selling feed-grade supplies of the grain to buyers including South Korea, Vietnam, China and the Philippines, displacing some U.S. corn, Emerald Group Australia Pty said.

Total Australian feed-wheat sales may have reached about 1 million metric tons, Chris Kochanski, general manager of trading at the Melbourne-based company said by phone today. Shipping volumes were minimal to date because of the delayed harvest and transport problems amid flooding, he said.

Corn in Chicago surged to a 30-month high this week on shrinking global stockpiles. Australia has a surplus of feed- quality wheat after record rainfall and flooding damaged the quality of the harvest, while export bans in Russia have cut supplies of competing grain from the Black Sea.

“That has provided a bit of a window of opportunity for Australian feed wheat to take demand away from high-priced corn and have very little opposition in doing so,” Kochanski said. Tokyo-based trading company Sumitomo Corp. last year took a 50 percent stake in Emerald.

Corn for March delivery fell 0.2 percent to $6.525 a bushel at 6:51 p.m. Melbourne time. The contract reached $6.6625 on Jan. 19, the highest level since July 2008. Wheat declined 0.6 percent to $7.9875 a bushel at 6:49 p.m.

Australian feed wheat, at about $260 to $265 a metric ton at domestic ports, could be sold into Asia below the value of U.S. corn shipments, Kochanski said. The wheat may also be competitive in the next feed-grain tender in Japan, he said.

Output Forecast

Australian wheat production this year may reach 25 million tons with about 10 million tons of feed quality because of continuing wet weather on the east coast, Bankwest, a unit of Commonwealth Bank of Australia, said in a report this week.

Eastern Australia would have plenty of supplies for local flour mills this season while exports of milling-grade grain this year would be mostly from South Australia and Western Australia, Kochanski said.

The size of the crop in eastern Australia, the deregulation of the market in the past few years and transport problems because of floods made it difficult to forecast total shipments for the marketing year that ends Sept. 30, he said.

Some production this year would be lost because of flooding, according to the Australian Bureau of Agricultural and Resource Economics and Sciences, known as Abares, which in December forecast a wheat harvest of 26.8 million tons and a total winter grains crop of 43.2 million tons.

It was too early to estimate the likely total losses in value of winter grain production including wheat as a result of the floods, Abares said in a report today. Still, if 1 million tons of unharvested crops were lost, that could represent a total cost of about A$250 million ($247 million), it said.

Further collection of weather-damaged crop in flood affected parts of Victoria, where the harvest was about 80 percent completed, was likely to be limited, the bureau said.

The bureau also said Australian sugar production may be about 4 million tons in 2011-2012 after the wet weather cut production to 3.6 million tons in 2010-2011. About 7 percent of cotton plantings, or 62,000 tons of cotton lint, had been destroyed and a further 2 percent of the plantings were at risk if crops didn’t have the opportunity to dry out, it said.

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

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

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