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Various sectors have outperformed the market this year – shipping isn’t one of them. General concern that there will be too many vessels in the water and the anemic pace of economic recovery have kept the Baltic Dry Index (BDI), at 2,648 as of November 1. That's far below its May 2008 pre-crisis high of 11,793.

Writing in August 2009, when its stock was trading in the $12-13 range and the BDI was also about the same place as now (2,468), I argued that Diana Shipping (NYSE:DSX) was well positioned to outperform during a shipping upswing due to its stronger balance sheet and newer ships. While the shares enjoyed a brief foray above $18 in mid-November last year and held over $15 at various points until May, now they’ve returned to the original $13 watermark ($13.46 as of the November 1 market close).

Aside from the general malaise of the industry, Diana’s share price has suffered because the company decided to pause its dividend (see transcript of Diana’s Q2 2010 earnings call) and use the money to buy more ships at bargain prices. This strategy has enabled Diana to keep its debt/equity and debt/asset ratios, 0.32 and 0.24 respectively, notably below those of peers Genco Shipping (NYSE:GNK) (1.35 and 0.51), DryShips (NASDAQ:DRYS) (0.94 and 0.45), Navios Maritime (NYSE:NM) (1.77 and 0.55), Eagle Bulk Shipping (NASDAQ:EGLE) (1.68 and .60), Excel Maritime (NYSE:EXM) (0.74 and 0.39), Newlead Holdings (NASDAQ:NEWL) (12.02 and .83), International Shipholding (NYSE:ISH) (0.81 and 0.37), and TBS International (NASDAQ:TBSI) (0.63 and 0.36) – even while it gobbles up more high-quality vessels.

But now there’s an additional reason why Diana may have a competitive advantage over other shipping houses: Australian wheat. The news for Australian wheat has been getting better and better. Higher than average rainfall has created a bumper Australian crop this year. (See A Surge for Australian Wheat, WSJ.) Meanwhile recent U.S. crop projections – though still at historic levels – have moved downward (see Harvest Shocker Battles Wall Street, WSJ) and the Russian harvest has been threatened by drought and wildfires. (See Wheat and Gold Stole the Market’s Headlines, WSJ.)

Diana has particularly strong ties to Australia. Digging into Diana’s annual reports reveals that for the last two years, Cargill, the dominant foreign player in Australian wheat, and mining giant BHP Billiton (NYSE:BHP), Australia’s largest company by market capitalization, have been its biggest customers. (Diana Shipping annual reports here and here.) Australian Wheat Board ((OTC:AWBZY)) is currently on track to be taken over by Canada’s Agrium (NYSE:AGU) and is also a regular customer.

The point here is that with strong ties to Australia in wheat and other sectors, it's fair to assume that Diana will have a competitive advantage in making deals to profit from Australia’s bumper crop.

The shipping market can be as unpredictable as the wind, but for those who want to place a bet on shipping, Diana’s position in Australia is one more reason why the company’s shares at their current valuation arguably provide a lower risk of loss and higher profit potential than competitors.

Disclosure: Disclosure: The author is long Diana Shipping (DSX) as of the original publication date of this post. The author does not hold a securities position in Genco Shipping (GNK), DryShips (DRYS), Navios Maritime (NM), Eagle Bulk Shipping (EGLE), Excel Maritime (EXM), Newlead Holdings (NEWL), International Shipholding (ISH), TBS International (TBSI), BHP Billiton (BHP), Australian Wheat Board (OTC:AWBZY), or Agrium (AGU).

Disclaimer: The information provided in this post does not constitute professional investment advice, and should only be used in consonance with all available information, including the opinion of a professional adviser, to make an investment decision.