Grain Supply Affected as Victoria Flooding Disrupts Rail, GrainCorp Says

Wheat exports from Australia, the fourth-biggest shipper, may be curbed as floods in Victoria state add to transport disruptions in the country’s north amid continued harvest problems, Commonwealth Bank of Australia said.

Logistical issues and price premiums for Australian wheat could reduce the bank’s December export forecast of 14 million metric tons in 2010-2011, Luke Mathews, a commodity strategist at the Sydney-based company said by phone today.

Heavy rainfall has inundated Victoria, following flooding in Queensland that devastated homes, destroyed crops, closed mines and killed at least 28 people in the past six weeks. Record wet weather in the second half of last year, linked to a La Nina event, cut crop quality and delayed harvesting.

“The issues that have been encountered since November last year have contributed to Australian wheat being the most expensive in the world for prompt delivery, and that does reflect the harvest delays, the quality declines and the production losses that have been the direct result of La Nina,” Mathews said.

Milling wheat for March delivery on the Australian Securities Exchange traded at A$327.40 ($323) a ton at 2:52 p.m. Sydney time. The March-delivery contract on the Chicago Board of Trade closed at $7.7325 a bushel on Jan. 14, or $284.12 a ton, according to Bloomberg calculations.

Australia may ship 13.5 million tons of wheat in the year ending Sept. 30, the U.S. Department of Agriculture forecast on Jan. 13, down from its previous estimate of 15 million tons and compared with its estimate of 14.8 million tons in the past year.

Quality Hurt

Grain supplies from Australia’s Victoria state will be disrupted by the latest flooding, with the effect on rail infrastructure still unclear, GrainCorp Ltd., the biggest handler in the east of the country, said today.

The quality of unharvested grain is also likely to be hurt by rain in Victoria and southern New South Wales, the Sydney- based company said in an e-mailed update.

Victoria, where harvesting is almost completed, may produce 4.4 million tons of wheat this season, according to a forecast by the Australian Bureau of Agricultural and Resource Economics and Sciences, making it the third-largest producing state after New South Wales andSouth Australia.

In Queensland, the fifth-largest producing state, rail deliveries to the Fisherman Islands shipping terminal in Brisbane will continue to be disrupted, GrainCorp said.

Toowoomba Repairs

“Infrastructure repairs on the Toowoomba line may take up to three months to complete, limiting grain deliveries to Fisherman Islands to road-only,” the company said.

Flooding in Victoria is affecting 43 towns and 1,400 properties, according to emergency services. Horsham, a town 300 kilometers (186 miles) northwest of Melbourne, may experience the worst flooding on record in Victoria when the Wimmera river peaks tomorrow, according toemergency services authorities.

“This really just compounds what’s been an extraordinarily frustrating harvest campaign for eastern Australia’s grain industry,” Mathews said.

National Australia Bank Ltd. last week maintained its 24 million-ton forecast for the country’s total wheat crop. Less grain was downgraded to feed wheat than previously expected, it said in a report e-mailed Jan. 14.

(Source: http://www.bloomberg.com/news/2011-01-17/grain-supply-affected-as-victoria-flooding-disrupts-rail-graincorp-says.html)