Bumper Aussie grains crop to strain silo capacity

A second bumper Australian grains crop could land some southern areas with storage shortages, official forecasters said, as they lifted again their forecast for exports, and hiked by 10m tonnes their estimate for world production.

Abares, Australia’s official commodities bureau, said that while the country "appears to have sufficient capacity" to store forthcoming winter grains harvests, the outcome depends on the composition of crops being held.

"Wheat, for example, requires a smaller volume of storage for any given tonnage than grains such as barley or oats," the bureau said.

Australia looks set for a particularly strong wheat harvest this year, forecast by Abares coming within 130,000 tonnes of last year’s record high of 26.3m tonnes, although barley and oats outputs are forecast well above average levels.

‘Temporary storage needs’

While most states look up to the task of storing a second strong harvest, on top of stocks left over from last year which as of August were running 40% higher year on year, South Australian handlers face an overspill which could prompt some to use makeshift capacity, such as silo bags.

"The prospective large production in South Australia again this year could require some use of temporary storage options," Abares said.

Wheat stocks held by bulk handers in South Australia last month were, at 2.7m tonnes, a relatively modest 25% higher than a year before, with on-farm inventories lower than in August 2010.

However, Abares highlighted that grain storage capacity is not evenly spread throughout the country, with more than 20m tonnes of the national total of 70m tonnes situated in Western Australia.

Export upgrade – again

The comments came as Abares edged higher to 20.5m tonnes its forecast for Australian wheat exports in 2011-12, a 100,000-tonne rise on a forecast last week which was greeted with scepticism by some analysts.

The bureau said its forecast reflected expectations of a 30% rebound in shipments from Western Australia, whose harvest last year was depressed by drought, with exports from eastern states stable.

Abares also raised its estimate for world wheat production, by 10m tonnes to 679m tonnes, citing better-than-expected harvests in the European Union and the former Soviet Union.

Corn vs wheat

The estimate for average wheat prices, as measured by US export values at Gulf of Mexico ports, was kept at $310 a tonne despite the higher output figure, noting the incentive presented by strong corn values for users to switch grains.

"World use of wheat for feed is forecast to increase by 9% in 2011-12 to around 122m tonnes," Abares said.

"This increase is the result of a higher corn-to-wheat price ratio, which will encourage substitution of wheat for corn.

"Even though feed consumption accounts for only around 18% of world wheat consumption, it is the major driver of fluctuations in world wheat consumption because human and industrial consumption of wheat are relatively stable in the short term."

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