January 29, 2011

 

Asia's high-grade wheat prices top US$500 a tonne

 

 

Asian millers have been shelling out more than US$500 per tonne for high-quality milling wheat, the first time in around 30 months, and prices are likely to remain unchanged until the next few weeks.

 

Millers are locking in cargoes of high-quality milling wheat at astronomical prices amid concerns that supply may tighten further until June, when the next crop will be harvested in the northern hemisphere.

 

The more price-conscious customers in low-income countries such as Bangladesh are looking at Pakistan to cover their needs but South Asian wheat at more than US$350/tonne, cost and freight is not cheap either.

 

"Prices are rising but what is more noteworthy is that millers are ready to pay higher rates provided they get the quality they are used to," said a Singapore-based executive at a global trading company.

 

Taiwan Flour Millers' Association has purchased a cargo of 52,000 tonnes of US wheat for shipment from the Pacific North-West during the March 15-30 period.

 

Dark Northern Spring wheat with 14% protein was bought around US$525/tonne, basis cost and freight.

 

The prices of high-quality milling wheat imported by Taiwan are widely considered a benchmark in Asian grain trade.

 

"Taiwan and Japan purchase a very special quality, a Mercedes Benz equivalent of wheat, which is bound to be costly," a grains analyst said.

 

He said the DNS grade which Taiwan has purchased contains 75% or more dark hard vitreous kernels, which fetch a premium in global trade; this grade is currently in tight supply.

 

Taiwan also purchased the Northern Spring grade with 14% protein around US$499/tonne, while the same grade with 13% protein was bought around US$428/tonne, c&f.

 

Japan is also paying a premium to get its noodle wheat supply from Australia and has changed its Australian Premium White wheat blending norms.

 

Australian noodle wheat prices rose above US$500/tonne as a devastating drought hit production in Western Australia.

 

In some cases, high-grade wheat isn't available even if buyers are willing to pay more.

 

On Thursday (Jan 27), Japan didn't get any offer of Canadian wheat in its weekly tender; it usually needs grain with a protein value of 13.5-14.0%.

 

Due to floods last summer and stocks gradually getting exhausted, Canadian wheat inventories are now with slightly less protein.

 

In Bangladesh, where quality norms are lower, buyers are snapping up cargoes from Pakistan.

 

Pakistan has sold eight cargoes for prompt shipment in bulk to Bangladesh totaling around 182,000 tonnes, and more sales are in the offing, trading executives said.

 

The sales were made at US$331-$334/tonne, free on board, for grain with 11.5% protein. Exporters are shipping out wheat purchased from surplus government stocks.

 

For those who cannot afford even these prices, the option is to purchase downgraded Australian wheat.

 

Australian General Quality wheat, a term used for flood-affected grain, with 10% protein and 11-12% moisture, has been sold to Bangladesh at US$260-$270/tonne, one of the exporters said.

 

However, with moisture being 2-3 percentage points higher than normal, this implies actual wheat content will be lower.