November 1, 2010

 

Asian millers face limited high protein wheat supply

Asia is facing a tight supply of high protein wheat, and millers are scrambling to lock in supplies, pushing up premiums sharply, trading executives said Friday (Oct 29).

 

Adverse weather, either too dry or too wet, has affected the wheat crop in not only Russia but also Canada, Germany, Australia and the US.

 

Protein values in wheat have been a major casualty of the erratic weather this year and millers in Japan, Indonesia, Malaysia and Vietnam are getting offers for wheat with 13%-14% protein at astronomically high premiums. High protein in wheat is crucial for bread making.

 

Dark Northern Spring Wheat is currently being offered at a US$3.80-a-bushel premium over wheat futures on the Minneapolis Grain Exchange, up from US$1.10/bushel two-three months ago. Earlier this month, premiums even jumped to around US$5/bushel over MGE wheat futures.

 

"There is a lot of uncertainty over the protein values of the ongoing spring wheat harvest, and the latest round of dry weather has raised concerns about next winter's wheat crop as well," said a Tokyo-based executive at a global trading company.

 

Suppliers are making offers and locking in premiums of more than US$40 a tonne, because they aren't sure how much spring wheat will be available with high protein levels around 14%.

 

The US is currently harvesting its spring wheat and plantings have started for winter wheat.

 

Buyers in Asia said Dark Northern Spring Wheat with 14% protein is being offered between US$400 and US$425/tonne, free on board.

 

After two successive years of winter wheat crops with lower-than-normal protein, US farmers are worried that the dry weather currently over the growing regions will affect the next winter wheat crop as well. The US is currently offering hard red winter wheat around US$320/tonne, FOB.

 

Higher US wheat futures pushed cash prices in Asia up by around US$10-$12/tonne this week.

 

Prospects for tight supply of high protein wheat are almost certain because the weather is dry in Western Australia and in much of the east, where a bumper crop is expected, excessive rains have hurt the quality of the grain by lowering protein content and raising moisture levels.

 

"There is still a lot of wheat available and in fact Eastern Australia is going to harvest a bumper crop but a lot of it won't be of milling grade," said a Singapore-based trading executive.

 

So far, early harvest results from Central Queensland indicate that downgrades of wheat to feed quality are significant, and concerns that the situation will be similar in southern Queensland are now mounting, Rabobank said earlier this week in a monthly report.

 

The quality of the crop may also have been affected in Northern New South Wales, ANZ Banking Group Senior Agricultural Economist Paul Deane said.

 

Western Australia's wheat output is likely to fall below four million tonnes to an eight year low.

 

Some traders are offering Australian Standard White wheat around US$400/tonne.