August 20, 2012

Indian wheat demand to rise on other origins' high prices

Following a rise in prices of other origins, demand for Indian wheat in the rest of Asia will likely strengthen in the coming weeks, mainly due to drought in the US and the Black Sea region.

It is the cheapest available, both for animal feed and for human consumption, a flour miller in Jakarta said.

East Asian nations have already stepped up purchases and the trend will accelerate as the Indian government has now started offering grain from ports along its east coast, which is closer, Singapore-based executive with a global commodity trader said.

Thai flour millers have bought at least five cargoes totalling 100,000 metric tonnes at US$312-321 a tonne, basis cost and freight, trading executives said Thursday (Aug 16). Demand is also stronger in the Middle East and North Africa as dry weather has badly hit the crop in the Black Sea region, the main supplier.

India has a freight advantage in Southeast Asia and demand for its wheat will rise further in the next few months as global prices are higher, an executive at a Bangkok-based flour mill said. The Thai deals, for 11.5% protein wheat, are for shipment by end-October; two cargoes were bought at US$316/tonne and one each at US$312 and US$321/tonne.

This is the first time in eight years that Thailand buying Indian wheat in bulk. It usually imports around two million tonnes a year and traditionally buys US and Australian grades. However, the cheapest Australian grade costs more than US$380/tonne, cost and freight, while US wheat grades are mostly above US$400/tonne, C&F.

Last week, South Korea purchased six cargoes of feed wheat totalling 325,000 tonnes between US$322 and US$326, C&F for arrival by November--all of it likely from India. Sellers include Alfred C. Toepfer International, Starcom Resources, Nidera and Glencore International PLC (GLNCY).

Indonesian flour mills have purchased several cargoes too, at US$255-300/tonne, free on board. Indian wheat in the private market, outside of state stocks, is now available around US$303/tonne, delivered at ports on the west coast, a Mumbai-based executive with a global trader said. The government, saddled with near-record high inventories, is also selling wheat to exporters on a delivered-at-port basis. However, some quality-conscious customers are still seeking small volumes of US wheat.

Japan bought 70,865 tonnes Thursday (Aug 16), while South Korea and Taiwan were seeking a total of about 90,000 tonnes Friday (Aug 17).