Wheat Rises as Australian Harvest Delayed by Drought

Wheat rose today on news in a statement from the Australian Bureau of Agriculture and Resource Economics which said drought conditions could significantly delay the Australian wheat harvest, and also could have a detrimental effect on the quality of the grain produced.

This seems like it's only a upward blip in the road, as there's so much wheat available for export this year, any news will cause a slight upward movement for wheat.

The December crop report from the Australian Bureau of Agriculture and Resource Economics shows wheat exports for the country are expected to reach 12.3 million tons, a significant increase from the 7.5 million tons exported last year.

With Australia attempting to compete in the premium wheat market of Taiwan, this probably couldn't have come at a worse time.

At 10:30 a.m. today on the Chicago Board of Trade, wheat futures for March delivery rose 2.5 pecent to $4.93 a bushel.

Australia Aiming to Compete in the Lucrative Taiwanese Premium Wheat Category

With record-setting wheat production this year, prices have been plummeting, putting pressure on the U.S., the world's largest exporter.

If that's not enough, the high-end wheat market is now receiving potentially more competition, as Taiwanese wheat importers are visiting Australia to get a first-hand look at how they produce, handle and transport their wheat.

AgFarm, an Australian grain trading specialist, is hosting the event, where seven flour millers from Taiwan observe the practices.

In a trial run last year, the Taiwanese flour mills imported 8,000 metric tons of high protein wheat.

Taiwan is known for its fickleness concerning quality standards of wheat, and the exercise is for the purpose of learning how Australian wheat producers can meet those rigid standards.

The reward is a premium price paid for meeting their specifications.

Historically, the U.S. has been the dominating force in this premium market, and it could signal a significant new competition if Taiwan is convinced Australia can consistently deliver the high quality, high protein wheats.

At this time there is no commitment from the Taiwanese, but after the tour AgFarm is hoping to secure orders for the wheat.

New Gascoigne wheat Strain May Work Well in Dry Australian Climate

Australian farmers should have another arrow in their wheat quiver as a new variety named Gascoigne has been developed that has worked well in past trials.

According to CSIRO it will probably perform best in the south-east New South Wales area.

CSIRO wheat breeder Garry Rosewarne said:

"It topped two trial sites in a very dry environment, but we've also had this in trials in 2004 and 2005 when they were quite good years and it was also yielding very well then.

"It's also got quite a large seed size, so we think that's certainly an advantage, particularly in dry finishes where you might get a lot of screenings.

"And it seems to perform well against all of the three rusts; leaf rust, stripe rust and stem rust."

Australia Should Still have Bumper Wheat Crop in Spite of Drought

Even though some areas in Australia may experience a drop in wheat production because of an ongoing drought, overall the country is expected to enjoy a huge increase in exports in contrast to previous years.

The USDA projects about a 25 million ton harvest in 2008-09, in comparison to 13 million tons in 2007. That amount (25 million tons) is expected to be revised down in the next USDA report. Even so, Russell Phillips, general manager, Australian department of agriculture, fisheries and forestry, said he thinks the country could end up exporting about 16 million tons this year.

The new Australian export regulator, Wheat Exports Australia (WEA), has accredited five companies for exports so far, as Cargill Australia Ltd, Elders Toepfer Grain Pty Ltd, Goodman Fielder Consumer Foods Pty Ltd, Grain Pool Pty Ltd and OzEpulse Pty Ltd made the first cut.

Former export regulator Australian Wheat Board (AWB) was replaced after a scandal caused them to be replaced. Still, they have applied to the WEA for accreditation this week and are waiting for a reply. The AWB was cited for taking illicit payments from the former Iraqi government of Saddam Hussein.

Globally, wheat is expected to reach record levels of 670.8 million tons by May 31, 2009, up by 9.9 percent over last year. Stockpiles could surge by 18 percent to 136.2 million tons, according to the USDA.

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