March 10, 2010
Asia Grain Outlook on Wednesday: Kazakhstan, Russia wheat may weigh on prices
Asian wheat prices are likely to come under pressure due to aggressive efforts by Russia and Kazakhstan to sell their wheat in the region, trade participants said Wednesday.
They said the upcoming buy tenders of Egypt and Libya are expected to set new lower benchmarks for sales even in Asia.
Kazakhstan plans to sell around 600,000 tonnes of grains, mostly wheat, to South Korea. If successful, the sale will pressure prices of other origins such as Australia, said an executive at a global trading company.
Landlocked Kazakhstan is keen to dispose of excess wheat stocks and aims to make the deliveries to South Korea through the land route via China.
Traders and analysts said if the plan has to succeed, the government will have to subsidize the sales, which may take some time but have already damped market sentiment.
"It will be pretty expensive to export wheat to South Korea from Kazakhstan through China," said Scott Briggs, Agricultural Commodities Strategist with ANZ Banking Group.
He said so far wheat futures on the Chicago Board of Trade haven't declined in tandem with cash prices due to weather uncertainties, with a persistent El Nino phenomenon that can affect production later this year and support from outside markets such as equities.
However, due to ample physical supplies, prices are eventually expected to fall, Briggs noted.
The May wheat futures contract on CBOT settled 5 1/2 cents, or 1.1%, lower Tuesday at US$4.89 1/2 a bushel.
Black Sea origin wheat is already quoting around US$155/tonne, free on board.
Egypt is seeking 60,000 tonnes of wheat in a tender for shipment in the second half of May and the results are expected later today. In its previous tender on Feb. 18, it bought mostly Russian wheat around US$169-US$170/tonne.
Traders expect more Russian purchases in the latest tender at prices much below US$170/tonne, which in turn may put downward pressure on wheat prices in Asia.
