October 4, 2010

 

US and Australia to win Iraqi wheat contract

 
 

US and Australian wheat suppliers are in advanced talks with Iraq's Grain Board to ship 100,000 tonnes of grain each to the Middle East country, an Australian exporter said.

 

The exporter said talks were continuing and it was possible Iraq could scale up the tender to 500,000 tonnes of wheat with both US and Australian suppliers winning additional tonnage.

 

Iraq's Grain Board issued a new tender on September 20 to buy at least 100,000 tonnes of wheat from any origin. Bids to supply the wheat were due by September 26, with the results expected on Sunday.

 

Between October last year and June, the first nine months of Australia's wheat marketing year, Iraq imported 125,400 tonnes of wheat from Australia, according to official Australian data.

 

Iraq purchased a further 50,000 tonnes from Australia and 100,000 tonnes from the US as part of a multi-origin tender in July for a total of 350,000 tonnes.

 

A Melbourne-based grain trader said the US and Australia are currently the key sources of wheat for the Middle East, given that supplies from the Black Sea were dwindling.

 

Russian banned grain exports on August 6 until at least the start of next year, fuelling a surge in wheat prices to two-year highs. The Chicago near-month spiked at US$8.41 per bushel on August 6 and ended the September quarter at US$6.74, still up nearly 50 % over the quarter.

 

Canada, usually a leading wheat shipper, has temporarily stepped down from the export market while its wheat board assesses the quality of the crop now being harvested, he said. Wet weather has spoiled some of the crop.

 

The US is expected to be a key source of wheat for importers in the Middle East and Asia in coming months.

 

"The US is set to be the leading source of wheat because it has the stocks, although getting grain out of ports could be an issue as wheat will have to compete for port space with soy and corn," the trader said.

 

The world's largest wheat exporter had stockpiles totalling 2.459 billion bushels at September 1, the US Department of Agriculture estimated.

 

Australia, typically the world's fourth-largest wheat exporter, is estimated to have end-September stocks of around 6 million tonnes of old-crop wheat, according to Sydney-based grain analyst, Wayne Gordon.

 

Traders said demand for Australian wheat had picked up in recent months as overseas buyers sought to replace cancelled cargoes from the drought-stricken Black Sea region.

 

Russia banned grain exports early in August while supplies from other Black Sea countries have also dried up.

 

A Perth-based trader said the strong demand had helped boost the Australian prime wheat price by around AUD100 (US$97) a tonne over the past 12 months. Landed in Southeast Asia, it now fetches AUD340 (US$329.9) per tonne, including cost and freight.