Australian wheat farmers may enjoy a record crop in 2011-12, but face problems storing it given the huge grain stocks set to be carried over from this season's harvest, Rabobank has said.
The bank lifted by 1.0m tonnes, to 24.0m tonnes, its estimate for the newly-finished harvest, noting better-than-expected receivals of the grain in many area, in both the drought-ravaged west of the country and the rain-soaked east.
And "early signs are that 2011-12 may post a new record", as farmers raise sowings to exploit higher prices, and encouraged by promising weather forecasts.
"Grain prices and a favourable climate outlook for the Australian Bureau of Meteorology are supportive of this early viewpoint," Rabobank said in a report.
Setting an all-time high would imply beating the 26.1m tonnes set in 2003-04, according to official estimates, although the bank pegged its initial forecast at 25.1m tonnes.
The 2010-11 crop may yet turn out to be a record breaker, being estimated by Australia's Abares commodities bureau at 26.8m tonnes, although this figure is questioned by many external analysts.
Price implications
However, a further bumper crop would present "key challenges" to Australian infrastructure already struggling to cope with the latest harvest, which was, unusually, focused in eastern states where grains logistics are less developed than in Western Australia.
Indeed, missed shipping opportunities, after heavy rains delayed the east coast harvest, and in some areas closed rail lines too, meant exports "will be constrained to just 14m-14.5m tonnes", leaving up to 4m tonnes in store.
The issue is further complicated by the large proportion of the 2010-11 crop which, thanks to rains, is of feed quality, requiring separate storage from the milling wheat which normally accounts for virtually all the Australian crop.
The implications of the dynamics were likely to be felt on prices, as Australian exporters undercut rivals to get shot of grain.
"What this means is that Australian feed grains will struggle to hold parity pricing with international benchmarks in 2011-12," Rabobank said.
Feed wheat vs corn
The comments come amid interest from as far as Europe in Australian feed wheat, with the grain's attractions boosted by the lofty price of corn as an alternative.
Current market estimates are that, in Asia, Australian feed wheat has already displaced 2-2.5m tonnes of corn in importers' rosters.
