Wheat inventories in Australia, the world’s second-biggest shipper, will probably hold above average this year even as handlers seek to maximize exports following a record harvest.
Reserves may be 8 million tons at Sept. 30, according to David Johnson, general manager of risk and pricing at Emerald Group Australia Pty. That compares with the average of 6.23 million tons over the past decade, according to data from the Australian Bureau of Agricultural and Resource Economics and Sciences. Holdings were 8.97 million tons last year.
Global wheat inventories may gain to an all-time high of 210 million tons this year, according to the London-based International Grains Council. Increased supply may help prices to extend declines for a second year, cutting costs for importers such as Indonesia, Australia’s biggest buyer.
“We just physically can’t get it out quick enough,” Alan Winney, chairman of the Melbourne-based grain marketer, said in an interview on May 4. “There’s going to be a significant carryover again,” said Winney, who’s got more than 35 years experience in the industry.
Wheat futures on the Chicago Board of Trade dropped 18 percent in 2011 and lost a further 7.2 percent this year to yesterday. The July-delivery contract traded at $6.0575 a bushel at 5:21 p.m. in Singapore on May 7.
The stockpiles estimate from Emerald is lower than rival forecasts, with Rabobank International predicting on April 10 holdings of 9.5 million tons and Commonwealth Bank of Australia looking for about 10 million tons. Stockpiles may total 10.5 million tons, Australia & New Zealand Banking Group Ltd. said March 14. The record figure is 9.98 million tons in 2005-2006.
Output from the Australian wheat crop now being sown may be 24.5 million tons, with shipments in the year starting Oct. 1 set to be 18 million to 19 million tons, Johnson said.
Abares in March forecast a harvest of 25.7 million tons, 13 percent below last year’s record 29.5 million tons as the crop area was seen declining. Exports in the year from July 1 may total 21 million tons, from the record 21.2 million tons a year earlier, according to the Canberra-based state forecaster.
Australia shipped 2.4 million tons in February, the third month exports were above 2 million tons, and 32 percent more than a year earlier, the Australian Bureau of Statistics said on April 4. Stockpiles were 21.3 million tons at March 31, 13 percent more than a year ago, it said April 24.
‘Already Half Full’
“Port capacity is over 2 million tons a month but you can’t run it at that,” said Winney. “Some storage sites have gone into the most recent harvest already half full from the year before.”
Emerald bought the Australian Bulk Alliance network from Sumitomo Corp. (8053) for A$120 million ($122 million) last year, to compete with Cargill Inc. and GrainCorp Ltd. (GNC), eastern Australia’s largest handler, in offering receival and port services. Emerald is 50 percent owned by Sumitomo.
Consecutive La Nina events that brought heavy rains to eastern Australia spurred last season’s record harvest, while wet weather this year has boosted soil moisture for crops currently being sown. Australia was drought-free for the first time in more than a decade, the government said April 27.
“There’s enough moisture around that people will try to put in a big crop,” said Winney, who previously held positions at Louis Dreyfus and the Australian Wheat Board. “Acreage will be there that gives us capacity for a big crop.”
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