GrainCorp 2010 Earnings Forecast Raised on Crop Outlook by ABN

By Madelene Pearson

July 14 (Bloomberg) -- GrainCorp Ltd., eastern Australia’s largest grain handler, had its 2010 profit forecast raised by ABN Amro Morgans Ltd. due to improved seasonal crop conditions.

Net income may be A$69.1 million ($54.2 million) in the year ending Sept. 30, 2010, ABN analysts Belinda Moore and Sam Turner said in a note to clients dated yesterday. That’s 30 percent more than their previous forecast. The broker also raised its 2009 profit forecast by 6.4 percent.

Farmers in Australia, the world’s fourth-largest wheat exporter, harvest the current 2009-2010 winter crop from about November. That crop, now planted, will largely underpin 2010 earnings for Sydney-based GrainCorp, ABN Amro said.

“The east coast grain crop is off to a great start,” Moore and Turner wrote. “Good rainfall in June has boosted prospects for this year’s winter crop.”

The Australian Bureau of Agricultural and Resource Economics, the country’s commodity forecaster, is predicting an east coast grain crop of 17.6 million metric tons in 2009-2010, ABN Amro said. That implies grain deliveries of 10.6 million tons for GrainCorp in fiscal 2010, up from 9.4 million tons a year earlier, applying a 60 percent market share for the company, the broker said.

More rain is needed in August and September to underpin the forecast, the analysts wrote. There are indications the El Nino weather pattern, which can cause drought in Australia and parts of Asia, is developing across the Pacific Basin, the Australian Bureau of Meteorology said July 8.

“The key risk to our view is El Nino,” the analysts said. “However we note the bureau has been incorrect in the past and the current share price already reflects drought-affected lows.”

GrainCorp fell 0.7 percent to A$6.90 on the Australian stock exchange at 10:53 a.m. in Sydney.

The profit forecast was also raised because of expectations GrainCorp will have lower net interest expenses, ABN said.

To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net