June 23, 2011

 

Asian wheat prices subdued as Black Sea supplies rise

 

 

Asian wheat prices will likely be under pressure next month due to ample supplies from Australia even as the Black Sea region steps up exports, trading executives said on Wednesday (Jun 22).

 

Australia physical milling wheat prices are US$35-US$45/tonne lower than they were just days ago, with flour manufacturers in East Asia seeking cargoes for September-December shipment.

 

Australian General Purpose wheat with 9% protein is being offered around US$292/tonne, Australian Standard White grade with 9% protein around US$307/tonne and Australian Premium White grade with 10.5% protein around US$337/tonne, free on board for October shipment.

 

"Even though drought has affected the wheat crop in several European countries and the US winter wheat harvest is also sharply lower on year, global supply continues to be maintained through other origins," said an exporter in Australia.

 

Australian wheat inventories are quite high, and the country may end the marketing year on September 30 with carryover stocks totaling around eight million tonnes, he said.

 

"We are now in a situation where corn supply is tight but wheat availability is not," said a Singapore-based executive with a global commodities trading company.

 

He said this is reflected in the premium of more than 35 cents/bushel that corn is commanding over wheat for the near-month contract on the Chicago Board of Trade, marking only the second time in 15 years that prompt CBOT corn has traded at higher prices than wheat. The first such occurrence was in April.

 

"Wheat will have difficulty to rise above US$7/bushel for the rest of this month," said a broker at a Tokyo-based commodities brokerage. Near-month CBOT July wheat is trading around US$6.67 a bushel. On Monday, prices dropped to a 6.5-month low, below US$6.55/bushel.

 

Ukraine has removed grain export quotas and Russia's ban on exports - imposed last year due to a devastating drought - is set to end June 30.

 

As Ukraine starts making offers for August shipments, Australia has had to reduce its feed-wheat prices. Australian feed wheat is being offered around US$265/tonne, FOB for September shipment, traders said.

 

On Friday, South Korean feed millers purchased optional-origin feed wheat at US$288-US$290/tonne, and Canadian-origin feed wheat at US$297/tonne, C&F for arrival in September and early-October.