October 8, 2012

 

Australian farmers hold back new-crop wheat sales

 

 

As Indonesia and Malaysia are likely to be in the market for December arrival grain cargoes, Australian farmers are holding back sales of new-crop wheat, expecting prices to rise as dry weather restrains crop yields.

 

Australian wheat was sold in containers or smaller cargoes this week to Indonesia as production estimates shrink with dryness hurting crops in the nation's key producing regions.

 

"Exporters are nervous selling bulk boats because of the drought," said one Sydney-based broker. "They would rather sell 2,000-3,000 tonnes in containers rather than sell 50,000 tonnes in bulk."

 

Australia's wheat production is likely to decline by more than one million tonnes from the government's most recent estimate, and fall 27% from last year's record crop, a Reuters poll showed.

 

Buyers were also keen on taking grains in containers with lower freight costs, traders said, adding that Australian prime wheat was offered in Southeast Asia at US$385, including cost and freight (C&F), this week for December shipment. This compared with bulk wheat prices for a similar variety of wheat being quoted at US$395 a tonne.

 

"Rainfall across most of the Australian grain belt has been below average this spring, compounding the negative effects of drier than average conditions observed through winter," Luke Mathews, commodities strategist at the Commonwealth Bank of Australia said in a report.

 

"Crop conditions are generally lower now than they were in mid-August."

 

As a result of the dry weather, Australia's wheat exports in 2012-13 are expected to fall below 18 million tonnes, he said, from an estimated record 24.9 million tonnes a year ago.

 

US wheat prices being offered in Asia were largely unchanged even as the benchmark Chicago futures eased this week.

 

"Premiums have been really firm as a result we did not see any softening of wheat prices in Asia," said one Singapore-based trader.

 

At the same time, buying activity in the region remained subdued with most importers, including the biggest buyer Indonesia, covered for supplies until November, traders said.

 

US spring wheat with 14% protein was quoted around US$430 a tonne, C&F, while soft white wheat was being priced around US$385 a tonne.

 

Chicago Board of Trade front-month wheat futures slid 4% this week, while soy faces a third straight week of decline amid a rapidly advancing US harvest. The corn market is on track to finish the week nearly flat.

 

South Korea's largest feed maker Nonghyup Feed Inc. has broken away from traditional sources to purchase 10,000 tonnes of corn from the Russian Far East. Price for the yellow corn, in a rare direct deal with a Russian trading house, was US$310 a tonne C&F to a Korean port and shipment was November-December 2012.

 

South Korea's CJ Cheiljedang Corp is seeking 42,700 tonnes of Australian milling wheat via a tender on Friday (Oct 5), traders said.

 

Taiwan's Breakfast Soy Procurement Association this week bought 60,000 tonnes of soy to be sourced from Brazil in an international tender for up to 180,000 tonnes which closed on Thursday (Oct 4).