November 3, 2011

 

Asia's wheat prices to decrease amid abundant supply

 

 

Supply from Australia's most recent harvest and restricted export demand for the remaining part of the year may cause Asian wheat prices to be pressured this month, according to trading executives on Wednesday (Nov 2).

 

According to Dow Jones, most traders expect prices to fall by US$5-10 a tonne due to strong competition among sellers.

 

"Australia is flush with wheat and prices are also low, but many exporters are still trying to undercut each other," a Perth-based executive said.

 

Prices may fall by US$5-7/tonne but the downside is limited as Australian milling wheat is already US$15-20/tonne cheaper than Black Sea origin, basis cost and freight.

 

Black Sea wheat is in demand in the Middle East and North Africa but it is difficult for the grain to make inroads in East Asia, a Singapore-based executive with a global commodities trading company said.

 

Importing Black Sea feed wheat in Panamax cargoes may be economically viable due to lower freight than smaller vessels, another trader said.

 

Australian Standard White wheat is now offered US$285-290/tonne on a delivered basis into East Asia for January shipment, compared with US$305/tonne for Black Sea wheat.

 

A few days ago, South Korean flour mills purchased ASW wheat at US$264-266/tonne, FOB for January shipment.

 

Egypt, the world's top importer, Tuesday (Nov 1) purchased Ukrainian and Russian wheat at US$264-268/tonne, C&F.

 

Late last month, South Korean feedmillers purchased Australian feed wheat around US$262/tonne, C&F.

 

Australian feed wheat is now available around US$270/tonne, C&F, traders said, adding that even Vietnam and China have bought it instead of the usual corn, which is very expensive.

 

On a delivered basis, feed wheat is US$70/tonne cheaper than US corn, but feedmillers are waiting for another downward correction in the next two weeks before making purchases for February arrival, an importer in Seoul said.

 

Last week, the International Grains Council said China's wheat imports will likely hit 1.5 million tonnes, 50% higher than an earlier forecast.

 

IGC has revised up Australia's 2011-12 wheat output projections by 2.7% to 26.2 million tonnes and its export forecast by 7% to 18.5 million tonnes.

 

Australia had multi-year high wheat stocks of 8.6 million tonnes on October 1 and stocks will be little changed a year later despite strong exports, it said.