August 20, 2011


Excess supply, flat demand to pressure Asian wheat market


Asia's wheat prices are expected to face some downside risks in the coming week due to abundant supply and subdued buying, traders said Friday (Aug 19).


A decline of around $10 a tonne is possible as various competitive origins compete in the Asian wheat market.


"The wheat market situation is currently just the opposite of a year ago, when Russia due to a severe drought had banned exports and prices had soared to multiyear highs," said a Malaysia-based executive with a global commodities trading company.


The revival of exports from the Black Sea region has added to the already large supply from Australia.


Traders said most buyers of milling wheat in Southeast Asia have already covered their needs until November, and only small volumes are expected to be traded for shipment in the next three months.


Buyers will now be looking for cargoes for December shipment, but they are not in a hurry to make purchases because of a likely downside bias in prices, said another trader in Singapore.


Australian Prime Wheat (APW) for shipment from the east coast is offered at US$310/tonne, while Australian Standard White is quoted at US$300/tonne and Australian General Purpose wheat at US$290/tonne, free-on-board.


Most traders expect APW wheat prices to fall below US$300/tonne if rains continue to be sufficient.


Australia is headed for a strong wheat crop in the last quarter, and it will have to aggressively compete with Ukraine for East Asian customers.


Ukraine's feed wheat is currently offered around US$295-$298/tonne, cost and freight for delivery into Vietnam. Australia's feed wheat offers in containers to Ho Chi Minh City are around US$305/tonne, cost and freight.


But traders said actual Australian feed wheat sales to Southeast Asia on a delivered basis are below US$300/tonne.


Traders are awaiting tenders from South Korean buyers for feed wheat arriving by November and December. In end-June they bought feed wheat at US$273.90/tonne, C&F for October and November arrival.


Feed millers in Vietnam have purchased a 55,000-tonne optional-origin cargo of feed wheat for September shipment around US$290-$295/tonne, C&F, a Ho Chi Minh City-based trading executive said.


Taiwan Flour Millers' Association will tender for a cargo of over 50,000 tonnes US wheat on September 1.

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