February 20, 2012

 

Firm demand, supply shortfall to bolster Asian grain prices

 

 

Asian grain prices are seen stable to higher this week, backed by buoyant demand, a supply slowdown from the Black Sea region and a potentially smaller South American harvest.

 

Australia has harvested a large crop and growers have sold only around 40% - enough to pay their bills - while holding on to the rest, Stefan Meyer, a Sydney-based cash markets manager with FCStone, said.

 

Shipping slots are being used to full capacity due to strong demand and Australian wheat is the most competitive in Asia, he added.

 

Australian Premium White wheat is being offered at US$275-US$278/tonne for March shipment from the East Coast, while Australian Standard White is US$5/tonne cheaper, traders in Singapore and Australia said.

 

Recent purchases by Iran, Iraq, Algeria, South Korea and Indonesia and upcoming demand from the Middle East region is likely to push up global prices, they added.

 

Cheaper grades of low-protein and animal feed wheat are not available in Australia, due to which ASW's discount to APW has almost halved, a Singapore-based executive with a global trader, said.

 

Similarly, due to tight supply of high-protein milling wheat, Australian Prime Hard is selling at a US$100/tonne premium to APW.

 

US wheat prices are supported by a slowdown in supply from the Black Sea region caused by unusually severe frost. Egypt, the world's top importer, Thursday (Feb 16) purchased 180,000 tonnes of US soft red winter wheat at US$259/tonne, free on board for April shipment.

 

Taiwan Thursday purchased US Western White at US$273.40/tonne, FOB, up 15% from early last month.

 

Traders said US soft wheat prices are also supported by greater use in animal feed, as corn is expensive due to tight US inventories and uncertainty over Argentina's crop.

 

Dry weather in South America may drag down the next corn harvest due in March and April.

 

South Korean feedmillers purchased 323,000 tonnes of feed corn last week, mostly of US origin, for end-May and June arrival between US$316/tonne and US$322/tonne, cost and freight. Prices are up to US$16/tonne higher than four weeks ago.