February 15, 2011

 

Australia to sell record feed wheat to China

 

 

Australia is seen to sell record volumes of feed wheat to China for 2011, with the world's third-largest exporter having abundant supplies while China's wheat crop is threatened by drought, traders said Monday (Feb 14).

 

Traders said Australian feed wheat was now the cheapest in the world, selling at around US$30 per tonne less than US corn, which faces its tightest supply situation since the early 1930s.

 

"Trade talk is that China has bought between 300,000 tonnes and 500,000 tonnes and has shown further interest at lower prices," a Melbourne-based trader said.

 

"It is going to be related to corn prices and how much they switch their coarse grain demand into feed wheat."

 

The trader said China may buy up to one million tonnes of Australian feed wheat following a downgrade of nearly half the just completed 2010/11 harvest to lower quality because of wet weather.

 

China normally only buys quality wheat from Australia, but this year is seeking low grade feed wheat as US corn prices soar.

 

The poorer quality wheat will either be bought for blending with better quality wheat for baking products or used as livestock feed.

 

"Australian feed wheat will be in demand not just in China but also in other parts of the world, with US$7 per bushel corn prices. It is not surprising to see 500,000 tonnes being sold to China and we expect more deals in coming weeks," a Singapore-based trader said.

 

Australia, which typically produces only four million tonnes of feed wheat a year mainly for domestic consumption, is likely to see around half of its 2011 crop of 22 million to 26 million tonnes reduced to poor quality, after unseasonal rains and floods damaged crops just as farmers geared up for harvest in December.

 

Last week the US government slashed its forecast for US corn stock piles 9%, projecting the tightest supply since the 1930s Great Depression as a record amount of the crop is used to make ethanol.

 

On Monday (Feb 14) corn rose 0.4%, climbing to its highest since July 2008 on tightening global supplies.

 

China normally buys up to one million tonnes of milling wheat from Australia each year but has previously shown little interest in feed wheat.

 

The FAO warned about rising commodity prices, particularly for wheat, that could cause social unrest such has been seen in Tunisia and Egypt.

 

AWB Ltd sold 55,000 tonnes of Australian Standard White milling wheat to Egypt last week at US$345 per tonne, with agreed freight costs at US$37.35 per tonne.