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Wheat Output in Australia to Drop From Record on Lower Area

March 6 (Bloomberg) -- Wheat production in Australia, the world’s second-biggest shipper, may tumble 13 percent from a record as farmers switch to barley and canola on better returns, a government commodity forecaster said.

The harvest may decline to 25.7 million metric tons in the year from July 1 from a record 29.5 million tons in 2011-2012, said the Canberra-based Australian Bureau of Agricultural and Resource Economics and Sciences. Area may decline 2.5 percent to 13.7 million hectares (33.9 million acres) as canola plantings rise 4.8 percent and barley sowings gain 2.9 percent, it said.

Rising incomes and growing populations in emerging markets are fueling demand for farm products, helping push global food costs 1.9 percent higher in January, the most in 11 months, the United Nations said. The Standard & Poor’s GSCI Agriculture Index of eight commodities has advanced 2.8 percent this year.

“Things are looking a little better for barley and canola than wheat,” Paul Morris, bureau executive director, said in an interview yesterday. “Because of the nature of Australian agriculture, where there’s a lot of mixed-enterprise farms and the farmers are quite savvy to changes in prices, they’ll move to some extent between activities depending on price.”

Canola, Barley

Wheat futures have tumbled 17 percent in the past year as global production and inventories headed for records and world trade surged to the second-highest level in at least in five decades. Global stockpiles may reach 220 million tons in 2012-2013 from 213 million tons a year earlier, Mike O’Dea, a senior risk manager at INTL FCStone Inc., said Feb. 22.

Canola futures have declined 3.2 percent on ICE Futures Canada and 2.3 percent on NYSE Liffe in Paris in the past year, while barley futures gained 7.3 percent.

Australia’s canola production may increase 5.4 percent to a record 2.9 million tons in 2012-2013 and barley output may gain 5.1 percent to 9 million tons, Abares said in a report. Wheat exports may total 21 million tons in the year from July, from a record 21.2 million tons a year earlier, it said. Australia is set to be the second-biggest wheat exporter in 2011-2012 after the U.S., according to the U.S. Department of Agriculture.

Black Sea, U.S.

The area sown to wheat, coarse grains and oilseeds in Kazakhstan, Russia and Ukraine may increase by an average of 2 percent a year to about 90 million hectares “over the medium term,” the bureau said. Between 11 million hectares and 13 million hectares of idle land suitable for cropping is available for expansion, it said.

The so-called free-on-board Gulf price of U.S. hard-red winter wheat may fall 7 percent to average $275 per ton in 2012-2013, reflecting record world opening stockpiles and expected high global production, the bureau said. Global wheat stockpiles may total about 210 million tons in 2012-2013 as production exceeds consumption and as inventories in the U.S. rise about 10 percent to 28 million tons, it said.

“Globally, we’ve seen prices for crops come down a bit over the last few months and we’re expecting, in real terms, that prices will ease over the next few years,” the bureau’s Morris said. “In terms of returns, they’ll be a little less favorable than in the last 12 months or so but, in historical terms, remaining reasonably high.”

Wheat for May delivery fell 0.6 percent to $6.6775 a bushel in Chicago today.

To contact the reporter on this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

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

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