October 19, 2010

 

Asia's wheat price to hike amid Australia's weather woes

Asian wheat prices are likely to rise this week on weather concerns affecting major exporter Australia and Ukraine's 2010 grain export quota, trading executives said.

 

Australia's new crop may turn out to be smaller than earlier expectations due to dry weather in the west and heavy rains in the east, they said.

 

Most traders handling Australian wheat expect production to be little changed from last year's 21.7 million tonnes, as gains from a bigger harvest in the east may be offset by the drought in the west.

 

New-crop Australian Premium White wheat is currently being offered between US$315 and US$320 a ton, free-on-board for January shipment, and Australian Standard White wheat around US$310-$314/tonne.

 

Last month, contracts for new crop APW shipments in December were done around US$305-$308/tonne.

 

"Prices are already high and may rise further," said a Singapore-based executive at a global trading company.

 

Buyers in Indonesia and Vietnam are still reluctant to buy, hoping that harvest pressure may drag down prices but in some parts of eastern Australia, where the harvest has been delayed by up to three weeks and there are concerns over quality, he said.
 

Production from a drought-affected wheat crop in Western Australia was revised sharply lower Friday (Oct 15) to 3.93 million tonnes, down 28% from an estimate a month earlier of 5.49 million tonnes by the state's Grain Industry Association.

 

The new forecast would be less than half of the actual 8.25 million tonnes produced in the last crop year to March 31, 2010.

 

Traders said prices of Australian wheat are also being supported by a stronger local currency.

 

APW for delivery to Indonesia is currently offered around US$375-$380/tonne and to Bangladesh around US$390/tonne, on a cost-and-freight basis.

 

Ukraine's export ceiling for the rest of 2010 of 500,000 tonnes of wheat has also buoyed sentiment.

 

"Earlier, some traders who were unable to ship out wheat from Russia due to a ban on exports had an option to send some cargoes from Ukraine, but that will no longer be available," said a trader at the Odessa port.