Wheat Advances as El Nino Weather Threatens Australian Output

By Luzi Ann Javier

Aug. 26 (Bloomberg) -- Wheat rose on concern global supplies may be smaller than expected as El Nino weather conditions threaten to curb output in Australia, the fourth- largest exporter.

Parts of Queensland, New South Wales, South Australia, Victoria and Tasmania have less than 40 percent chance of getting above-average rainfall from September to November, as the weather pattern “dominates the outlook in eastern Australia,” the country’s Bureau of Meteorology said today.

An El Nino event, which causes drier weather in Asia, may cut Australia’s wheat output by between 20 percent and 40 percent, Ben Barber, futures adviser at Bell Commodities Ltd., said by phone from Melbourne today. Traders in the U.S. “could be seeing it and buying into that,” he said.

Wheat for December delivery added 0.5 percent to $5.0125 a bushel in after-hours electronic trading on the Chicago Board of Trade at 1:14 p.m. in Singapore.

New South Wales, Victoria, Queensland and South Australia states were estimated to produce 14.5 million metric tons in 2009-2010, up from an estimated 12.5 million tons a year earlier, according to a June 16 forecast by Australian Bureau of Agricultural & Resource Economics.

Together, the four states account for almost 70 percent of the nation’s output. That share may drop to as little as 50 percent, should a mild El Nino take hold in September and damage crops, John Reeve, agricultural commodity sales director at Standard Chartered Bank in Singapore, said July 29.

El Nino

“We usually produce on average between 19 million to 20 million tons,” Bell’s Barber said, referring to the national output. “In previous El Nino years, Australia produced anywhere from 9 million tons to 12 million tons.”

Futures also advanced as farmers in Argentina said they will halt some grain and beef shipments from Aug. 28. to Sept. 4, after the government vetoed parts of a bill that cut export taxes for growers affected by the worst drought in decades.

“It will obviously curb supply,” Barber said. Still, the suspension of some exports would not have as much effect on prices as last year’s farmer protests because the market has been anticipating smaller shipments from the South American nation, he said.

The U.S. Department of Agriculture lowered on Aug. 12 its estimate on Argentina’s wheat exports to 1.5 million tons in the 2009-2010 marketing year, from 2.5 million tons in July. That compares with 8.4 million tons in 2008-2009, when Argentina was ranked the world’s sixth-largest shipper.

Tax Protests

Farmers staged a week-long protest against taxes and export restrictions in March, blocking highways and halting shipments. Four months of protests last year halted grain and livestock sales, sparking food shortages.

Soybeans for November delivery added as much as 0.7 percent to $10.0575 a bushel in Chicago, before trading at $10.0375 a bushel at 1:19 p.m. Singapore time.

China, the world’s largest importer of the oilseed, bought 110,000 tons of soybeans from U.S. exporters for delivery in the marketing year beginning Sept. 1, the USDA said yesterday.

“That’s supporting the fundamentals of soybeans,” Barber said. “You’re constantly seeing that demand for U.S. soybeans” from Chinese buyers, he said.

Sales of U.S. soybeans for delivery in the year that starts Sept. 1 totaled 11 million tons as of Aug. 13, up 57 percent from a year earlier, when sales before the North American harvest were a record, USDA data show. China bought 6.87 million tons, or 62 percent of the total, according to the department.

Corn for December delivery gained 0.6 percent to $3.2875 a bushel, after declining as much as 0.4 percent earlier.

“Corn is just following soybeans and wheat a little bit as well,” Barber said, referring to the trend in futures prices. “The main story is soybeans.”

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net