February 21, 2011

 

Asian wheat prices to remain stable for the month

 

 

As more blended wheat is bought at relatively cheaper rates, Asian wheat prices are likely to stay in check for the rest of the month, trade participants said.

 

Flour millers and exporters have turned to blended grades of wheat to cut costs since weather damage to crops worldwide tightened supplies and jacked up prices of the high-protein grain widely used in noodle and bread making.

 

Although close to half of Australia's wheat harvest of 26 million tonnes this year may be downgraded to feed category, large volumes of this low-quality wheat are being blended with high-priced grades to meet demand from flour mills overseas, raising the quantity of milling wheat available and taking pressure off the market price structure.

 

With a greater variety of wheat grades harvested this year, more of the crop is being blended, Mick Cattanach, managing director of Emerald Group Australia Ltd., a major Australian grains.

 

Earlier this week, high-quality US dark northern spring wheat with 14% protein was being offered around US$480/tonne, free on board, and hard red winter wheat with 12.5% protein around US$395/tonne, FOB, while Australian Premium White, or APW, wheat with 10.5%-11% protein was offered at US$380-$390/tonne from the east coast.

 

Many flour mills in Indonesia, Vietnam, Sri Lanka and Bangladesh are instead purchasing Australian General Purpose wheat, and blends of low-quality AH9 and higher APW grades, which are selling at a large discount to the more traditional Australian grades.

 

AGP is offered around US$338/tonne, FOB, or US$372-$390/tonne on a delivered basis to different destinations in South and Southeast Asia.

 

APW is being blended with AH9 to come up with a suitable milling wheat, said a Singapore-based executive with a global trading company. He said the APW content in the blended wheat could vary between 10% and 40%.

 

Such Australian wheat blends are available for as low as US$325/tonne, FOB, even cheaper the two-year old Pakistani crop, which buyers in Bangladesh purchased at US$330-$335/tonne, FOB.

 

Due to the paucity of higher-quality Australian Noodle Wheat, even quality-conscious Japan has increased the content of APW allowed in the blended high-grade wheat it imports from Australia, reducing the required amounts of ANW.

 

A trader in Singapore said that with lower amounts of standardised Australian wheat available, all sorts of blending is taking place. There is an unusually wide range in the five main quality parameters - moisture, protein, falling number, test weight and screenings - because of the weather-induced damaged this year, he said.

 

Even millers are blending wheat grades post-purchase. Cheaper grades of Australian wheat are mixed with high-protein grades to cut costs, and the quality of the dough is maintained using enzymes and additives, said Franciscus Welirang, chairman of Indonesia's flour mills association, Aptindo.

 

Mills have to blend wheat across grades and origins to adjust to tight supply, said Sebastien Thilmany, a Lausanne-based trader with the trading company Ameropa.