January 6, 2011

 

Australian flood worries Asian grain traders

 

 

Heavy flooding in Australia is worrying Asian grains traders, although there has been little impact on the physical trading so far.

 

Japan, the largest importer of wheat in Asia, has not been active since Christmas. The country's Ministry of Agriculture, Forestry and Fisheries is not expected to issue any tender until next week, an official said.

 

Japan had already been avoiding regular imports of Australian wheat due to the effect of earlier droughts on wheat quality.

 

"Wheat imports from Australia will probably slow even more, as the ministry has to ensure quality. What it may do is to draw down on existing stocks first," said a Tokyo-based trader at a global trading firm.

 

"Buyers in Asia who are just coming out of the New Year holiday season are not encouraged to buy at such expensive prices," he said, adding that potential buyers are awaiting further news on winter wheat crops before committing to purchases at these high levels.

 

CBOT wheat prices had on Monday (Jan 3) settled at their highest levels since August 2008 due to worries about poor global weather, including flooding in eastern Australia and dryness in the US Plains.

 

Heavy rains and flooding in Australia's northeastern Queensland state have stopped bulk wheat exports and badly damaged summer crops, but further south in New South Wales and Victoria, harvesting, transport and export are currently not impeded, logistics provider GrainCorp Ltd. said Tuesday (Jan 4).

 

All rail-based accumulation of grains for export in Queensland has been halted, the company said, adding that regular operations may not resume for up to two weeks.

 

Kaname Gokon, deputy general manager of Japanese commodity brokerage Okato Shoji Co.'s research division, said that although the adverse weather could spur prices higher on the CBOT, any strengthening of US dollar may limit gains.

 

"However, unfavourable weather is very supportive of CBOT wheat, so we may see the downside being limited," he added.

 

On Tuesday (Jan 4), CBOT wheat for March delivery, the most-active contract, dropped US$0.16 1/4, or 2%, to US$7.89 1/4 a bushel.