Australia may displace the European Union as the world’s second-biggest wheat shipper as cargoes jump to an eight-year high, easing a shortage that drove global food costs to a record. The country may export about 18 million metric tons in the 12 months from October, according to the median estimate in a Bloomberg survey of eight analysts and traders. That’s 1 million tons more than predicted by the U.S. Department of Agriculture, and the most since 2004 based on that data. Prices may decline to $6.90 a bushel by the end of December from $7.66 now, the median of the estimates showed. Wheat declined 16 percent since February as farmers planted more crops in response to prices that rose 47 percent last year. Extra supply is also coming from Russia, once the fourth-biggest shipper, which resumed sales last month after an almost year- long ban imposed as drought ruined crops. Australia’s harvest, which starts in October, is being closely watched because the USDA is still forecasting a supply shortage globally. “Australian exports are going to run at near-maximum port capacity for the foreseeable future, at least until the end of next year,” said Adam Davis, a commodity trader at Merricks Capital Services Pty Ltd. in Melbourne. With stockpiles still left from the last harvest and “another reasonable crop coming, capacity is likely to be pretty high,” he said. Even with this year’s decline, wheat traded on the Chicago Board of Trade, a global benchmark, is still 5.7 percent higher than a year ago. The Standard & Poor’s GSCI Agriculture Index of eight commodities gained 36 percent in the past 12 months, led by corn. Global food prices jumped 39 percent and reached an all-time high in February, the United Nations estimates. Second Place Wheat exports from the European Union may slump 33 percent to 15 million tons in the 2011-2012 season, taking Australia into second place globally, according to USDA data. Australia exports wheat through 20 grain terminals, from Geraldton on the west coast to Newcastle in the eastern state of New South Wales, according to data on a government website. The crop is usually hauled across oceans by panamaxes, the largest ships able to navigate the Panama Canal, and smaller supramaxes. Seaborne trade in grains will expand 1.3 percent to 243 million tons this year, the second-highest figure in at least a decade, according to Clarkson Plc, the world’s biggest shipbroker. Australia will account for about 9 percent of the total, the London-based company estimates. About 90 percent of global trade moves by sea, according to the Round Table of International Shipping Associations. Baltic Exchange Returns for owners of panamaxes operating in the single- voyage market dropped 48 percent in 12 months to $13,017 a day, data from the Baltic Exchange show. Returns on supramaxes fell 36 percent to $14,149 a day, according to the London-based bourse, which publishes rates for more than 50 maritime routes. While Clarkson expects the global trade in grain, coal, iron ore and other dry bulk commodities to rise 4 percent to a record this year, a glut of ships is building. The number of panamaxes expanded 23 percent to 1,862 vessels since the end of 2008 and owners have orders at shipyards equal to 47 percent of existing capacity, data from Redhill, England-based IHS Fairplay show. The fleet of supramaxes jumped 97 percent to 1,297 carriers, with another 367 still on order. Forward freight agreements, traded by brokers and used to bet on future transport costs, anticipate panamax rates no higher than $13,518 through 2016 and supramax costs at a maximum of $14,725, Baltic Exchange data show. Panamax returns reached $94,977 in 2007 while supramaxes were chartered at $72,729 in the same year, spurring the surge in orders for new vessels. Anticipated Shipments The farmers and exporters should fare better than the shipping companies. GrainCorp Ltd. (GNC) is eastern Australia’s largest grain handler and the anticipated shipments after this year’s harvest starts in October should boost sales, said John Welsh, a research analyst at BBY Ltd. in Sydney, who rates the stock a “strong buy.” GrainCorp will report a 93 percent jump in net income to A$154.7 million ($161.2 million) in its fiscal year ending next month, the most since at least 1997, according to the mean estimate of six analysts’ estimates compiled by Bloomberg. Shares of the Sydney-based company rose 5.8 percent this year. The government ended a monopoly system on wheat exports in 2008, allowing companies from Minneapolis, Minnesota-based Cargill Inc. to Regina, Saskatchewan-based Viterra Inc. to expand their businesses. Bloomberg Survey The exports predicted in Bloomberg’s survey are lower than the record 20.1 million tons forecast by Australian Bureau of Agricultural and Resource Economics and Sciences, or Abares, in its June 15 crop report. The Canberra-based bureau estimates this season’s shipments at 18.5 million tons compared with the USDA’s forecast of 17.5 million tons. Australia’s crop may also be smaller than expected. National Australia Bank Ltd., Australia & New Zealand Banking Group Ltd. and Commonwealth Bank of Australia all cut their harvest estimates this month because of dry conditions in eastern growing areas. The Murray-Darling Basin, which extends from southern Queensland to South Australia, had the driest June since 1986, according to the Bureau of Meteorology. Global wheat production will advance 3.7 percent to 672.1 million tons in the current marketing year, compared with consumption of almost 675 million tons, the USDA estimates. The grain is still trading about 18 percent above its five-year average, data compiled by Bloomberg show. Corn Stockpiles Combined stockpiles of wheat and corn, both of which can be used as feed for livestock, were forecast to fall 3.6 percent to 303.4 million tons before the 2012 harvest, the lowest since 2008, according to USDA data. Wheat may be Australia’s most valuable farm export in the 12 months ending in June, according to Abares. Agricultural shipments were valued at A$30.4 billion in the previous year, or about 10 percent of total exports, according to data compiled by Bloomberg from government statistics. Asia-Pacific customers represented about 75 percent of shipments in the year started October 2010, with Indonesia taking about 20 percent of the total, according to Abares. The eastern region of Queensland, New South Wales and Victoria may harvest more than 9 million tons of higher-quality milling wheat this year, compared with about 6 million tons last year, according to Emerald Group Australia Pty, a Melbourne- based grain marketing company. Grain Industry Wheat production in Western Australia, usually the biggest shipper, will jump 76 percent to 8.05 million tons this season, according to the state’s Grain Industry Association. Stores of the grain with bulk handlers at the end of June totaled 13.4 million tons, including 7.3 million tons of milling wheat used in bread and cookies and 6.1 million tons of lower- quality wheat used to feed livestock, the Australian Bureau of Statistics said Aug. 5. Stockpiles were 9.9 million tons a year earlier, according to bureau data. Stockpiles accumulated before the harvest in October should be “large,” said Luke Mathews, a commodity strategist at Commonwealth Bank of Australia in Sydney. “That, combined with forecasts of decent harvests in the coming months, does bode well for Australian wheat exports.” To contact the reporter for 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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