February 11, 2008

 

High global prices makes Kazakhstan wheat an attractive option

 

 

Rising prices for hard red spring wheat and Canadian Western Red Spring (CWRS) wheat and a 50-percent drop in dry bulk rates since November have helped Kazakh spring wheat become competitive with spring wheat delivered to Western Hemisphere destinations, the USDA said in its monthly "Wheat: World Markets and Trade" report.

 

Historically, the cost of Kazakh wheat is prohibitively expensive relative to HRS and CWRS because of the high shipping costs.

 

The price explosions in HRS and CWRS have moved current FOB prices up 75 percent in three months to US$615/tonne from the Pacific Northwest.

 

On the other hand, Kazakh spring wheat prices rose just 10 percent to US$390/tonne.

 

While prices climbed, bulk freight rates crashed; the benchmark Baltic Dry Index (BDI), which approximates demand for bulk shipping, is off 50 percent from its high in November.

 

As long as US and Canadian prices stay high and freight stays at prevailing levels, Kazakhstan and Ukraine could be viable/competitive suppliers of wheat to the Western Hemisphere, the report noted.

 

However, currently, these wheats are still more expensive than Hard Red Winter wheats.

 

Currently high prices did little to dampen global demand as fresh import tenders were announced by Jordan, Egypt, Iraq and Turkey.

 

US wheat shipments to most markets continue more than 20 percent ahead of last year's pace while wheat exports for Kazakhstan is up to a record 8.5 million tonnes.

 

Russia is up to 12.5 million because wheat shipments were strong before the imposition of export taxes. Also, these export taxes do not apply to flour shipments and exporters are expected to take advantage of strong regional demand.

 

Argentina is down 500,000 tonnes to 10.5 million based on announced changes to export licensing procedures.