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Australian Milling Wheat Exports May Drop to 3-Year Low on Rain

Dec. 6 (Bloomberg) -- Milling-wheat exports from Australia, the fourth-largest shipper, may drop to the lowest level in three years because of drought in the country’s west and rain damage in eastern states.

Shipments of milling-quality wheat, used in bread, pasta and noodles, may decline in 2010-2011 to the lowest level since 2007-2008, when total exports fell to less than 10 million metric tons, Wayne Gordon, an analyst at Rabobank Groep NV in Sydney, said by phone today.

Wheat futures gained to a four-month high on concern that rain is slowing the Australian east-coast harvest and damaging crops after drought cut output in the west. High-quality wheat may be “in short supply” in 2010-2011 as rain in Europe and drought in Russia also curbed production, forecaster Gail Martell said in a report on Dec. 1. Unharvested crops in South Australia and Victoria may be less rain-affected, Gordon said.

“There are some big crops to come in and it is just a matter of what happens in those regions,” he said.

Wheat for March delivery in Chicago rose as much as 2.4 percent to $7.98 a bushel and traded at $7.90 at 6:17 p.m. Melbourne time after advancing 13 percent last week. Milling wheat for January delivery on the Australian Securities Exchange rose 1.2 percent to A$333 ($329) a ton after gaining 29 percent last week.

Feed wheat accounted for 4.2 percent of Australia’s bulk wheat exports in 2008-2009, according to the most recent breakdown from government regulator Wheat Exports Australia.

Export Demand

As much as 5 million tons, or 35 percent, of east-coast production may be downgraded to feed quality this year, Commonwealth Bank of Australia analyst Luke Mathews wrote in a report yesterday. The bank estimated total Australian output at 22.3 million tons and exports at 14 million tons.

“This will be the largest feed-wheat production year in Australia,” Mathews said. Feed wheat typically represented less than 10 percent of total output, according to the report.

A “super-wet harvest” in Germany, Poland, the Czech Republic, Slovakia and Hungary this year damaged wheat quality, meaning higher-quality grain from France and the U.K. “is flying off the shelf,” Martell said in the Dec. 1 report.

Japan, Asia’s second-largest importer, is accelerating purchases as supplies tighten and prices climb. The Ministry of Agriculture, Forestry and Fisheries has brought forward an import tender by two days, Toshiki Tojo at the grain trade division said. The government last week made its largest tender purchase in two years.

Australian wheat exports of 14.3 million tons this season could include more than 3 million tons of feed wheat, based on conditions in New South Wales, Rabobank’s Gordon said.

National Australia Bank Ltd. forecast at least 10 million tons of wheat may be downgraded and most of that could be classified as feed-grade.

To contact the reporter on this story: Wendy Pugh in Melbourne at

To contact the editor responsible for this story: James Poole at

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