Pakistan wheat exports will not affect global prices

Pakistan's planned wheat exports are unlikely to weigh on global prices, unless the sales are subsidised by the government, according to trading executives.

Last week, Pakistan's cash-strapped government, which has failed to make large-scale procurement of the local harvest, permitted exports of two million tonnes during the marketing year to March 2011.

However, high local prices are likely to prevent exports of more than 10% of the permitted volume for this year.

Pakistan's wheat export price offers are too high to make any significant dent in the global market, said a trader dealing with grain supplies in the Middle East.

"I don't think Pakistan's wheat exports will drag down global prices. On the contrary, it can prompt some origins to raise their offers," said Muhammed Najib Balagamwalla, chairman of Seatrade Group, a Karachi-based commodities trading company. He said the government needs to subsidise sales if it aims to reduce the domestic surplus.

Traders mostly expect shipments of Pakistani wheat in containers to Malaysia and Persian Gulf. They said a large number of containers return empty to Dubai and adjoining regions after delivering goods in Karachi. These containers may be used to export small volumes of Pakistani wheat into the Persian Gulf.

Najib said without government subsidies, exports are unlikely to exceed 200,000 tonnes this year.

He said offers for exports of Pakistan's hard wheat in containers are already being made by traders at US$285-US$290/tonne, free on board; freight costs to Dubai will be around US$5/tonne.

Australia's prime hard wheat is being offered at US$230/tonne, FOB and can be exported in bulk to the Persian Gulf around US$280/tonne.