March 30, 2012

 

Cargill's AWB reports Asia's solid demand for Australian wheat

Cargill Inc.'s Australian unit AWB Ltd., Thursday (Mar 29) reported solid demand for Australian wheat, including grades suitable for feeding to livestock, throughout Asia.

 

"In the past month we have made key sales to China, Indonesia, Kuwait, Malaysia, New Zealand and Vietnam of various grades of milling and feed wheat," AWB's Richard Williams said in a statement, without citing the size of those deals.

 

Demand for lower-grade wheat remains "very solid," particularly in China, as customers substitute feed wheat for US corn in livestock rations due to the relatively high price of corn, he said.

 

AWB's view of the market reinforces comments from Tom Puddy, head of grain marketing at Cooperative Bulk Handling Ltd. in Western Australia. He said Friday that increased demand for Australian wheat in China could give a big boost to Western Australia's export efforts this year as the region is already seeing strong demand in traditional markets.

 

Williams said a record pace of Australian exports is significantly reducing the large domestic stocks.

 

As these stocks decline, in the second half of the calendar year, AWB expects an appreciation in the Australian basis for wheat in the eastern states and South Australia, he said.

 

"Western Australian wheat prices are likely to remain under pressure due to the size and their reduced quality profile of the wheat crop" in the state, he said.

 

The global market continues to watch wheat crop conditions in the Northern Hemisphere, particularly in Europe and Russia, because the yield expectations for these crops are critical for price direction, he said.

 

The heavy weight of Australian wheat stocks means local prices are slow to respond to any supportive price moves in the Northern Hemisphere, he said.

 

Williams commented as AWB lowered its estimated returns on collective sales of most wheat from the 2011-12 crop.

 

Returns on pooled sales of benchmark Australian Premium White wheat of 10.5% protein in the eastern pool were trimmed by AUD7 (US$7.3) to AUD258 (US$268.2) a tonne, free on board. The estimated return on Australian Prime Hard grade of 14% protein was left unchanged at AUD360 (US$374) per tonne, FOB.

 

Durum Grade one of 13% protein was held unchanged at AUD400 (US$416) per tonne but returns on most other grades were cut by AUD2-8 (US$2.08-8.31) a tonne.