June 18, 2012

 

Asia wheat prices buoyed by strong demand, smaller supply

 

 

Fears of reduced wheat supplies from Australia, Europe and the Black Sea region and high demand is likely to be lower this year is likely to bolster Asian wheat prices.

 

The July wheat futures contract on the Chicago Board of Trade rose 7.5 cents Thursday (June 14) to US$6.2350 a bushel. The Kansas City Board of Trade July wheat contract rose 5.5 cents to US$6.46 a bushel, while the July wheat contract on the Minneapolis Grain Exchange rose 20.75 cents to US$7.9425 a bushel.

 

Global wheat prices are likely to hold strong, with seasonal harvest arrivals from the Black Sea region possibly providing only a temporary price correction in the next quarter, and they are likely to be higher compared with early 2012, an executive with a Melbourne-based commodities exporting company said.

 

Australia on Wednesday (June 13) lowered its wheat output forecast for the next harvest, due from October, by 6.2% to 24.1 million tonnes, an 18% drop from the previous year's record high.

 

The London-based International Grains Council has forecast wheat exports from Russia and Ukraine to fall 21% and 26% to 17 million tonnes and 4 million tonnes, respectively, in the next marketing year that begins July 1 due to lower output from adverse weather.

 

The European Union's wheat exports are likely to fall 15.5% in 2012-13 to 14.2 million tonnes because of weather-induced lower production, the IGC said.

 

The United Nations' Food and Agriculture Organization has forecast global wheat output of around 680 million tonnes in the 2012-13 aggregate marketing year, down almost 20 million tonnes from a year earlier.

 

Analysts and importers expect the number to be revised lower in the next few months if the weather continues to be adverse in Australia.

 

Even if India firms up its plans to sell wheat from government stockpiles, there's a captive market for high-quality US and Australian milling grade wheat in the region that will remain intact, said an importer in Seoul.

 

Many buyers have a strong preference for particular grades of high-quality wheat, and if production is lower elsewhere, US prices and exports will move higher, said an agricultural commodities analyst with a Singapore-based commodities brokerage.

 

A trader in Jakarta said there are several buying inquiries from millers for third quarter shipments, which could be in anticipation of a further rise in prices.

 

Cash market buying activity was strong Thursday as buyers snapped up cargoes to cover their requirements for July-September shipments.

 

Japan, South Korea and Taiwan Thursday stepped up purchases of wheat, buying around 220,000 tonnes, almost all from the US, in a series of tenders.

 

The Taiwan Flour Millers' Association bought Dark Northern Spring at US$333.94/tonne, free-on-board, and Hard Red Winter at US$301.35/tonne, also FOB.

 

South Korea's mills bought DNS with 14% protein, HRW with 11.5% protein and Soft White wheat with 9.5% protein around US$315.35/tonne, US$264.94/tonne and US$250.22/tonne, FOB, respectively.