March 24, 2010

 

Asia Grain Outlook on Wednesday: Europe sells wheat to SE Asia; prices may fall

 

 

Europe is making forays into the Asian wheat market and prices may fall below US$4.0 a bushel within the next two months, trading executives said Wednesday.

 

A French wheat cargo is likely to be delivered next month in Thailand while the U.K. has sold feed wheat to the Philippines, said an executive at a global trading company.

 

He said the volumes of European wheat sales into Asia are unlikely to be large due to logistics and quality but they do damp sentiment.

 

The May wheat futures contract on the Chicago Board of Trade ended 9 3/4 cents, or 2%, lower Tuesday at US$4.76 3/4 a bushel.

 

"Most sales from the U.K. and France to South-East Asia are of feed grade but they indicate the aggressiveness with which exporters want to get rid of their stocks," said a grains broker in Singapore.

 

Another trader said European milling wheat can be sold in South-East Asia on a delivered basis around US$240/tonne and feed wheat closer to US$220/tonne.

 

Australia's prime wheat is being offered to Indonesia at US$245/tonne, cost and freight, and hard wheat at US$285/tonne.

 

He said it is currently cheaper for South-East Asia to import French milling wheat but the price gap isn't large enough to make a major switch from Australian grades.

 

South-East Asian millers use the bulk of Australian white wheat for noodles while French red wheat is more suitable for biscuits and cakes.

 

Traders said Australian wheat is currently holding on to its price levels because the supply from western region is tight, but the market can be pushed lower if there is a significant decline in CBOT futures.

 

They also said Europe's wheat sales to South-East Asia should be seen in a larger context where traditional buyers of one origin are trying other sources, which are enticing them with cheaper prices.

 

Russia has already captured a major share in Egypt's wheat imports, which was a U.S. bastion a few years ago.

 

Russia and France are now also making forays into the South American wheat market.

 

Russian milling wheat is currently being offered at US$167-US$168/tonne, free on board, for April-May shipment.

 

"U.S. carryover stocks of wheat are likely to be significantly higher this year as Europe and Russia selling at lower prices," said an importer in Japan.

 

This month the U.S. Department of Agriculture raised its forecast for 2009-10 U.S. ending stocks to a 22-year high of 1 billion bushels, compared with 657 million bushels a year earlier.

 

The importer said around 75% of world's wheat output is from winter plantings, which are mostly harvested in July and August; this large crop is likely to be factored into prices in May, when CBOT futures could fall to around US$4.0 a bushel.