Australia kicks off new-crop wheat exports, mkt eyes Russia

(Reuters) – Australia, the world’s second-largest wheat exporter, has kicked off new-crop grain marketing with the sale of 1 million tonnes to Asia, amid concern that potential Russian curbs on exports of its drought-hit harvest could lift global prices.

More deals for Australian wheat are likely as buyers scramble to cover supplies, traders attending a grains industry conference in Thailand told Reuters.

“Everyone is scared because of the risk to cheap Russian supplies,” said a trader with an international trading company. “It is best to cover before any export restrictions are announced by Russia.”

The news on Australian wheat exports came as Thailand made substantial soymeal purchases from the international market, with Asian importers snapping up grain cargoes amid the U.S grain belt’s worst drought in 56 years.

U.S. wheat notched its biggest daily climb since mid-July on Wednesday, snapping a five-session losing streak on expectations that drought will force Russia to limit exports.

DRYNESS IN AUSTRALIA

Australia is also facing dry weather in key producing regions and there are forecasts that El Nino weather patterns could hurt the nation’s wheat crop.

Dry weather across Western Australia, the largest wheat producing state in the country, has triggered a series of forecast downgrades for yield projections although the weather bureau sees a 70 percent chance for the region to receive above average rains.

Western Australia typically produces more than a third of the country’s wheat output and any major damage to the crop could lift global prices.

Australia prime wheat to Asia was sold at about $340-355 per tonne, free on board, for shipment between January and March, a second trader said.

“Australian wheat is much cheaper than U.S. wheat,” he said. “The price could go up as Western Australia needs rain and people are talking about El Nino.”

U.S. soft white wheat is being offered in Asia at about $400 per tonne, including cost and freight. This compares with a similar quality of Australian wheat quoted at $375 per tonne C&F.

Weather forecasters are predicting an El Nino weather pattern later this year that will bring dryness from Australia to India, hurting crops and deepening concerns over global food shortages.

The Japan Meteorological Agency has said El Nino is already underway and will last until winter.

Australia is likely to produce about 24 million tonnes of wheat, down from last year’s record crop of nearly 30 million tonnes, putting exports at about 16 to 17 million tonnes, traders said.

Thai feed mills have bought up to 1 million tonnes of soymeal in recent deals, while Vietnam is in the market to cover about 200,000 tonnes, traders at the conference said, as Asian buyers resume purchases after staying away for more than two months.

All eyes are on Russia, where government officials will meet on Friday to discuss prospects for the drought-hit grain harvest.

The U.S. Agriculture Department has already cut its forecast for Russian wheat exports this year to 8 million tonnes from 12 million. The current estimate lowers Russia’s percentage of global wheat exports to about 6 percent.

Russia barred grain exports for almost a year in August 2010 after a severe drought. Some market observers have speculated that this year’s wheat harvest
might fall below the crop of 2010, when it brought in 41.5 million tonnes of wheat. (Reporting by Naveen Thukral; Editing by Chris Lewis)