February 18, 2011

 

Asian grain importers well covered for H1 2011

 

 

Asian grain importers have locked in stocks for H1 2011 requirements and even beyond, and most are adequately covered with no immediate concerns of a supply shortage or panic buying.

 

Traders and analysts said the supply pipeline was well fed though the costs have gone up sharply in the past one year.

 

Millions of tonnes of wheat, corn, soy and soymeal have been purchased for shipments until September.

 

Apart from some aggressive purchases of rice by Indonesia and Bangladesh, there hasn't been any unusual stockpiling and most grain trades are to meet the normal demand of the next several months.

 

Many of these purchases are made at a premium over futures contracts on the CBOT and the final price is locked in at a later date.

 

Transactions have even been made for crops, which haven't been harvested.

 

China has purchased 6.5 million tonnes of soy from Argentina's upcoming new crop for April-July shipment, the director of grains trading company Cosur, Freddy Pranteda, said.

 

He said sales to China have been robust, adding that Brazil has sold 1.5 million tonnes of soy to the country for June-August shipment just over the past four weeks.

 

However, industry players cautioned that this shouldn't be construed as panic buying because it is usual for grain processors to make purchases several months in advance and shipments arrive much later.

 

Most Indonesia's flour mills have covered their wheat import needs for until June, and some even for July, contracting imports for around 2.2 million tonnes so far for shipments in 2011, Franciscus Welirang, chairman of Indonesia's flour mills association, Aptindo said from Jakarta.

 

However, he said, mills have started to pass on some of the higher costs to customers. Prices for some Indonesian flour grades was raised around 4.5% this month.

 

Saudi Arabia has covered its wheat import needs through April and has strategic reserves equivalent to six months of demand, which provide a flexibility to decide on the date of the next wheat import tender, Waleed Elkhereiji, director-general of the Grain Silos & Flour Mills Organization, said.

 

Australia, one of the world's largest wheat exporters, has already sold millions of tonnes of the grain from its latest harvest, for shipment from now up until July, and total exports this year may touch 16 million tonnes, up 8.5% on-year.

 

"Buyers are also comfortable buying wheat until July because they hope that the summer harvest in the northern hemisphere may take some steam out of the market by then," said Mick Cattanach, managing director of Emerald Group Australia Ltd., a major Australian grain trading company.

 

The fact that forward cash market trades are taking place shows that there isn't a crisis in grain supply, said a Singapore-based grains analyst.

 

Overall wheat inventories still remain comfortable, with a global stocks-to-usage ratio of around 27%, said Nobuyuki Chino, president of Unipac Grain, a Tokyo-based commodities trading company. A ratio of anything around 25% or higher is considered healthy by analysts.