SYDNEY, Australia – A drought-affected poor harvest of wheat and barley is in storage bins across Australia, but doubts are growing about quantities available for export.
National wheat exporter AWB Ltd. said the exact size of the harvest was hard to pin down because a “fair bit” was in private warehouses or had been sold domestically and had not been delivered to the export pools.
“It’s hard to get a specific handle on the size of the crop,” spokesperson Peter McBride said.
The exporter still officially puts the size at 9.5-10.5 million tonnes for the crop year ending March 31, down from 24.5 million tonnes last season.
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The size of the barley harvest is similarly halved, with the Australian Bureau of Agricultural and Resource Economics forecasting 3.3 million tonnes against the year-earlier 7.5 million tonnes.
McBride said the quality of the wheat that survived Australia’s 11-month drought to make it to harvest was good, with high protein levels. Analysts said the drought was likely to have the opposite effect on barley, reducing malting quality.
Meanwhile, the drought has turned things upside-down in a country where domestic grain markets are normally driven by export prices.
“To be perfectly honest, it’s an ideal year not to have too many exports on the books,” one leading grains trader said.
Low-level deliveries of wheat to AWB’s export pools were explained by prices $50-$70 Aus a tonne less than the domestic cash market.
AWB’s current pools for the 2002-03 harvest price of Australian Premium White grade, for example, are $265 against a domestic cash price of $295 in Geelong.
“You’ve got a massive inverse in this market around the world. For them (AWB) to capture the export market, they’ve basically got to sell the market down $60 against the export market,” the trader said.
He said the market was becalmed in the past week.
“Everything is being done hand-to-mouth. People are very scared. They don’t know which way the market’s going. And they don’t want to own grain that could fall $30-$40.”
The main factor behind fears of crashing prices are imports entering the country, primarily British wheat.
Australian authorities have approved the import of up to 150,000 tonnes of British wheat, as well as 250,000 tonnes of United States sorghum and 48,000 tonnes of U.S. corn. The trade expects more wheat imports than this.
But every tonne of wheat shipped to Australia represents a bet on one side that prices will stay high. And every potential buyer who stands outside the market sees a chance imports will cause prices to plummet.
Market imbalances are being worsened by the view that grain imports will lead to a $40-$50 premium for grains in the country over city prices – a reversal of the usual $15 a tonne premium paid by city buyers.
Imported grain can theoretically be transported into the country after processing into pellets, but traders doubt the processing capacity exists to allow this to fully occur.
Forward sales are at a standstill, as growers attempt to cope with a devastated crop and having to buy high-priced wheat to cover forward sales entered into last year.
