January 25, 2011

 

Asia looks to Australia for wheat

 

 

With US corn supplies diminishes and exports to Asia limited, it is expected to be favourable for wheat growers in Australia as Asian traders seek Australia for feed wheat as an alternative stock feed source.

 

This is according to AWB Limited's national acquisitions manager, Jon White, who also said that the US corn market was crucial for Australian feed-wheat exports and prices as Asian stock feed buyers scrambled for limited stocks.

 

But a key to Australian feed-wheat exports will be the ability to physically move grain to ports, with floods damaging rail and road infrastructure between country grain storages and port terminals.

 

Last week, corn prices on the Chicago Board of Trade rose 9% after the USDA reduced its estimate of global corn production by 4.7 million tonnes and the size of the US crop by 2.4 million tonnes.

 

The CBOT corn futures price had rose US$21 a tonne to US$259 a tonne - an increase of 9% on the previous week.

 

US corn is the barometer of world coarse-grain prices and is closely linked to wheat prices - both milling and feed quality.

 

Corn prices are almost double what they were at the end of last June.

 

CBOT corn prices were trading at US$155 a tonne seven months ago and are now heading towards the record levels of 2008, which prompted food riots around the world.

 

By comparison, US milling wheat was priced at US$198 a tonne in late June and has risen 69% since then.

 

Last week, US wheat was trading at US$7.73/bushel or AUD288/tonne.

 

Significantly, the USDA also reduced its estimate of 2010-11 global corn stocks last week by three million tonnes to 127 million tonnes and the US crop by 2.2 million tonnes to 18.9 million tonnes.

 

The stocks-use ratio for US corn is now 6.5%, the lowest in more than 30 years.

 

Put simply, it means if the US new-season crop completely failed, the country's corn supplies will be exhausted in 24 days.

 

White said feed-wheat sales into Asia were beginning to rise as a result of supplies of US corn drying up.

 

"The news is positive for the Australian grower," he said.

 

"Wheat will displace corn (in Asian markets). Feed wheat will remain at a discount to corn. If corn prices increase, wheat prices will rise with them."