March 4, 2009

Australian wheat exports may be hit in the near term as port congestion in western part of the country could result in major buyers such as Indonesia and South Korea switching to other origins.

 

Over the past few days flour industry officials in both Indonesia and South Korea have expressed concerns over Australian wheat shipment delays.

 

Franciscus Welirang, chairman of Indonesia's Wheat Flour Association, said imports from Australia would be much lower than 2.5 million-2.7 million metric tonnes expected earlier.

 

Welirang said most Indonesian companies have wheat stocks to last 45-50 days, but added it takes at least 45 days from placing new orders for shipments to arrive.

 

"This automatically means that most, if not all, companies have had to look to other markets to ensure they don't run out of stocks because of the delay (at Australian ports)," he said.

 

In South Korea, the Korea Flour Millers Industrial Association, or Kofmia, sent a letter last week to the Australian government, saying the country would have to look at other origins for wheat if the port congestion in western Australia persists.

 

"Ships that arrived in Western Australian ports to carry wheat to South Korea in early February are not expected to leave port until late March," said a Kofmia executive, declining to be named.

 

South Korean flour millers are keen the port congestion ends soon, as they have stocks only for another month, he added.

 

However, other countries such as Japan and Malaysia aren't planning to reduce their Australian wheat imports as they believe Australian wheat delivers in terms of quality and value and are willing to endure some shipment delays.

 

"Low ocean freight cost and competitive free-on-board prices make Australian wheat a very attractive deal for Malaysian buyers," said the buying manager of a Malaysian flour mill.

 

He said the landed cost of Australian wheat in Malaysia, around US$250/tonne, cost and freight basis, is cheaper than comparable origins such as the U.S.

 

"Wheat shipments from Australia to Japan have been a bit slow in the past couple of weeks but we don't expect any major delays in getting Australian wheat shipments," said a trader in a Tokyo-based brokerage firm.

 

He added Japan was expected to buy 1.5 million tonnes of wheat from Australia this year, which has been the average level for the past several years.