Wheat stockpiles in Australia, the world’s fourth-largest exporter, may increase by more than expected as the pace of overseas sales slows on tougher competition, according to Commonwealth Bank of Australia.
“Australian wheat is simply overvalued on world markets,” Luke Mathews, agri-commodities analyst at the bank, wrote in a report e-mailed today. Farmers are reluctant sellers, holding large supplies on farms or in warehouses, he said.
Australia is facing increased competition from lower-cost Black Sea region supplies amid a global glut, Tom Puddy, export wheat marketing manager for CBH Group, said last month. The country’s stockpiles may increase to 4.14 million metric tons by Oct. 30 from 3.14 million tons a year earlier, the U.S. Department of Agriculture has forecast.
“There is probably a little bit of upside to those numbers that the USDA is working off,” Mathews said by phone from Sydney. The bank is reviewing its figures, he said.
Wheat for July delivery on the Chicago Board of Trade fell 0.4 percent to $5.00 a bushel at 2:46 p.m. Melbourne time. Futures have dropped 7.7 percent this year.
Australian shipments in February were 1.23 million tons compared with 1.31 million tons in the year-earlier month, according to the Australian Bureau of Statistics. March figures are due on May 7.
“If the data doesn’t show a strong recovery then Australia may observe a larger than anticipated build” in its wheat stockpiles over the next 12 months, Mathews said.
Shipments in March were probably about 1.2 million tons, compared with more than 1.9 million tons a year earlier, Puddy estimated on April 19.
Australian wheat output next harvest is forecast at about 20 million tons, Commonwealth Bank said in the report today, leaving a March estimate unchanged. Planting is from late April to mid June with harvesting from October to early January.
Sowing conditions are favorable in eastern Australia while dry weather has persisted in Western Australia, the report said.
“Farmers over there are dry sowing on the hope they will get rain and really there is still a lot of time left for that rain to come,” Mathews said. “If we can get a crop up and away, it is really what happens in spring which will ultimately determine the size,” he said.
Western Australian wheat for January delivery, the new-crop contract, closed at A$215 a ton yesterday. ASX Ltd. began trading the Western Australian futures on Sept. 14 last year.