August 24, 2011

 

Australia completes first new-crop deal with Thailand

 

 

Australia has sold 35,000 tonnes of high protein wheat to Thailand last week, which is believed to be the nation's first new-crop deal in Asia as buyers boost purchases on renewed concerns over availability of best quality grains.

 

US wheat futures <Wc1> have climbed more than 10% so far this month, rising 10 out of 11 sessions on signs of lower spring wheat production and a drought which is threatening planting of the winter crop in the US.

 

Even in Australia, prolonged dryness in parts of Queensland and New South Wales, which produce prime hard wheat, is threatening yields that could further squeeze supply of high protein wheat.

 

"New-crop enquiries are starting to pick up, certainly high quality wheat is part of the balance-sheet that is the tightest," said one Sydney-based trader.

 

"There are less alternative origins for high quality wheat for Asian consumers than what they thought a while ago."

 

An exporter sold 35,000 tonnes of Australian prime hard wheat to a group of Thai flour millers for January shipment at around US$400 a tonne, including cost and freight, two traders familiar with the deal said.

 

"It's a consortium of Thai flour millers who have signed the deal," said one Singapore-based trader. "There is a shortfall in the supply of high quality milling wheat and buyers are trying to secure supplies."

 

Asian buyers slowed down purchases in July after Russia resumed grain exports, selling cargoes at a discount of around US$40-$50 a tonne to US and European grains.

 

But buyers' interest in Australian wheat has resumed, with expectations of tight global supply of high-quality milling grains.

 

"Canada hasn't really got going on its spring wheat harvest as yet and there are mixed reports about the quality of the US spring wheat harvest," said another trader.

 

"This encourages buyers to look to Australia for high quality milling wheat."

 

Late plantings of the US spring wheat crop due to flooding, hot weather when the spring wheat plants were flowering and now delayed harvest have combined to trim production prospects.

 

Wheat values have also been supported by signs that the US hard red winter wheat crop may struggle because of a prolonged drought in the US Plains, threatening seeding of the 2012 crop that typically starts in September.

 

Still, Australia's wheat production for 2011/12 could reach 24 million tonnes, according to analysts' estimates as improved production in Western Australia, the top exporting state, offsets lower output in northern parts of the eastern states.

 

The estimate is an average of forecasts by government agencies and private forecasters and compares with a five-year average national to 2010/11 of 18.79 million tonnes.

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