BLBG:Wheat Stockpiles in Australia Seen Nearing Record as Coal Lures Rail Cars
Wheat stockpiles in Australia, set to be the world’s second-biggest shipper, may climb near to a record by September as competition for rail capacity with coal- mining companies creates transport bottlenecks in eastern states.
Inventories may increase to 8 million metric tons to 10 million tons by Sept. 30 from as much as 7.3 million tons a year earlier, according to Steve Burt, managing director of PentAG Nidera, a Queensland state-based trader partly owned by Nidera Group. While the country will have a normal export program, there’ll be “quite a large carryover towards the end of 2012,” said Alan Winney, chairman of marketer Emerald Group Australia Pty. “I see big problems on the east coast.”
The wheat crop is forecast at 26.2 million tons by the Australian Bureau of Agricultural and Resource Economics and Sciences, just short of last year’s record 26.3 million tons. Exports may climb to an all-time high of 20.4 million tons in the year from Oct. 1 from 18.7 million tons, the agency said on Sept. 13. Harvesting starts this month and a second bumper crop may help extend a 23 percent drop in global prices in September.
“Rail is a big issue,” said Winney in an interview. “For all the benefits that have come to Australia from the mining boom, it’s also taken a lot of the rail cars out of the agriculture industries into the mining industries. It’s forcing the volume to go to the larger companies quite quickly.”
‘Own Trains’
Emerald doesn’t have much choice “but to go out and get our own trains,” he said in Melbourne on Oct. 12. The company, 50 percent owned by Sumitomo Corp. (8053), is the fifth-largest grain operator in Australia and bought 3.4 million tons from farmers last year, he said. Winney has more than 35 years experience in agribusiness, including roles with Louis Dreyfus and the Australian Wheat Board, according to the company website.
Carryout inventories reached a record 9.98 million tons in 2005-2006, according to Abares. Wheat for December delivery advanced 0.2 percent to $6.2525 a bushel on the Chicago Board of Trade today. The slump last month was the largest since 1974.
Grain exporters in New South Wales and Queensland states share part of their transport infrastructure with coal mining companies. Australia, the world’s largest shipper of coal, may see export earnings from the coking variety used in steelmaking jump 29 percent to A$37 billion in the year to June, with shipments rising 11 percent to 156 million tons, the Bureau of Resources and Energy Economics said Sept. 20. Revenue from thermal coal may increase 29 percent to A$18 billion.
‘Choke Points’
“It’s New South Wales in particular where you’ve got the choke points,” said Burt from PentAG Nidera in an interview Oct. 13. “We physically can’t get the extra trains on the slots” because of the competition from coal, he said.
Australia may ship about 18 million tons of wheat in the year started Oct. 1, according to Emerald. Exports may be 17.5 million tons to 18.5 million tons, said Burt. That compares with an estimate of 19 million tons from the U.S. Department of Agriculture, which ranks the country as the second-biggest supplier after the U.S. this coming year.
Winney saw problems in the east because of two consecutive bumper harvests. There is “carryover stock that’s everywhere. There is insufficient rail. We are going to have difficulty in some country sites to even receive grain,” he said.
Rain in the eastern states has boosted optimism that the crop will approach last year’s 26.3 million tons. The country may produce 25.2 million tons in 2011-2012, Commonwealth Bank of Australia said Oct. 11, lifting its estimate 7.2 percent from August on favorable conditions.
‘Real Risk’
“Access to infrastructure is a real risk for everybody,” said Winney, referring to country storage, railways and ports. “Most of our competitors are moving to integrated supply chains. We think inevitably we are going to have to move more into the logistics chain,” he said.
Emerald has purchased two storage sites in Victoria and is discussing storage locations with a number of other parties, said Winney. Viterra Inc. (VT), based in Regina, Saskatchewan, is investing in 40,000 tons of additional bunker storage at Witera, South Australia state, and is constructing a grain receival facility at Dooen in Victoria state with a 200,000-ton capacity, according the company website.
To contact the reporters on this story: Jason Scott in Melbourne at jscott14@bloomberg.net; Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
