June 11, 2012
Australia wheat exports slow on tight supply and competition
Limited supply and abundance of Black Sea wheat may cause Australia's feed wheat prices to increase and slow exports in the second half of this year, trading executives said Friday (June 8).
Australia became a major feed wheat supplier by default because rains damaged a large part of the crop in 2010-11 and 2011-12, but the same may not be the case in the next harvest, they said.
Trading executives also pointed out that rains damaged Australian wheat in 2010 just a few months after Russia had its worst drought in a millennium and feed wheat supply from the Black Sea region dried up.
Australia's important role in global feed wheat trade was circumstantial and may not last, said a Singapore-based trading executive.
There are hardly any feed wheat offers from Australia's new crop which is now being planted and will be harvested in October because exporters aren't certain of its size, said a Melbourne-based executive with a global trading company.
Australian Standard White wheat with 9% protein and Australian Premium White wheat with 10.5% protein are quoted around US$260-US$270 a tonne and US$270-US$278/tonne, free-on-board for shipment in July-August from the east coast.
Feed wheat prices have to be below these levels, but firm offers are difficult to obtain, said a trader in Kuala Lumpur.
Traders said Australian feed wheat from the old crop is unlikely to be exported below US$290/tonne, C&F East Asian ports, and prices may rise further in the next few months.
They said feed wheat exports are also slowing down because better returns, equivalent to US$275/tonne, FOB, can be fetched by selling it locally in New South Wales and Queensland.
Small volumes of Black Sea and central European feed wheat are being offered for August shipment around US$240/tonne, FOB, but it may also translate to around US$290/tonne on a delivered basis in East Asia.
The Black Sea region's discount to Australian wheat will widen closer to the harvest, but traders there too are reluctant to make large offers because of the likely sharp fall in Ukraine's output in 2012-13.
Traders are not currently confident of filling an entire panamax shipment of 60,000 tonnes for East Asian destinations, an exporter in Lausanne said.
"Traditionally, East Asia has met much of its feed wheat requirements from the Black Sea region, and there's no reason why it shouldn't be the same again," another trader in Australia said.
Some traders say Australia's large inventories of more than 9 million tonnes of wheat contain not more than 2 million tonnes of feed-grade quality. A large volume of more than three million tonnes, deemed as feed-grade in some quarters, can actually be exported as lower-quality milling wheat, such as Australian General Purpose and Australian Utility Hard grades.