July 29, 2010

Australian wheat to face fewer rivals in Asia

Australia's wheat is seen to meet less competition in the Asian market in 2011 as there will be less rival Black Sea grain, which was threatening its dominance in the last few years.

Wheat from Australia could also take a bigger share of the Middle Eastern and African markets, industry executives said.

"Some of the origins which have been competing into the Asian market for the last couple of years won't be there as aggressively, so Australia has a good window of opportunity to put wheat into the international market. As the supply from other origins and cost of freight to deliver it to other markets changes, Australia will also have wheat available for Middle East and east African markets," grain exporters association vice president Alick Osborne said.

Most buyers in Southeast Asia traditionally import the bulk of their wheat from Australia, but in the last few years cheaper supplies from Russia and Ukraine have posed a challenge. Mills in Indonesia, Vietnam, Malaysia and Thailand started blending larger portions of Black Sea wheat to make flour.

Extreme drought conditions in eastern Europe have hammered its grain crop. Russia may harvest less than 80 million tonnes of grain this year as severe drought has hit many key grain-growing regions, Deputy Economy Minister Andrei Klepach said on Tuesday (July 27).

Ukraine's government may limit food grain exports in the second half of the 2010/11 season to avoid domestic shortages in the wake of crop damage, an industry analyst said.

The CBOT front-month wheat contract rose almost 28% in July, in its biggest monthly gain since 1996 on estimates of lower output in Canada, Russia, Ukraine and parts of western Europe.