Rains stoke Australia's wheat downgrade fears

Grain handlers highlighted the impact of heavy rains on Australia's wheat industry even as state statisticians flagged the high supplies of moisture-downgraded grain still left to sell from the last harvest.

GrainCorp said that rains, which weather officials pegged at up to eight inches over the last week, had caused "minor to moderate flooding" at some of its  yards in New South Wales, besides leaving some grain crops in the centre and south of the state in line for downgrades.

It is "expected that some quality effect from the rain will begin to emerge as harvest activity resumes" after rains, which are expected to extend into this week, the company, the main grain handler in eastern Australia, said.

In in the north of the state, "grain loss or effect on quality [is] impossible to estimate", the group added, but noted that the harvest was about 75% completed.

'Indications of sprouting'

Separately, CBH Group, which covers Western Australia, a region affected worse earlier by harvest rains, said that one of its four zones was seeing a "broad range of quality", while another was continuing to turn up grain damaged by rain, which encourages sprouting and the utilisation of wheat grains' valuable starch and protein reserves.

Australia's end-October wheat stocks, according to ABS

2011 - 7.336m tonnes, of which: 3.840m tonnes milling wheat; and 3.496m tonnes feed wheat

2010 - 3.440m tonnes, of which: 3.066m tonnes milling wheat; and 374,000 tonnes feed wheat

"Wheat deliveries continue to show indications of sprouting," CBH's regional desk said, adding that "barley quality continues to be borderline between malt and feed with 60% being received into malt segregations".

Meanwhile, the Australian Bureau of Statistics which highlighted the amount of feed-quality wheat still left in storage from the last harvest, which was more severely affected by harvest rains.

Of the 7.34m tonnes of wheat in store in Australia at the end of October - the first month of the 2011-12 crop year but typically the low-point of the annual cycle 3.5m tonnes was of feed grade, up than nine times on the figure a year before.

"Difficult harvest conditions [in 2010] contributed to a reduction in the quality of grain," the bureau said.

The overall stocks figure was twice as high as a year before.

'Causing concern'

On Friday, National Australia Bank warned that "recent rainfall for northern and central New South Wales is causing concern for crop quality and associated price downgrades".

However, the  rains have not dampened hopes of another crop high on quantity.

The bank raised its estimate for the ongoing harvest to 26.6m tonnes, implying Australia's second-highest ever, behind the 2010 crop which the ABS upgraded earlier in the month to 17.9m tonnes.

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