November 7, 2011


Asian wheat market quiet; Australian harvest pressure looms


Most Asian wheat buyers withheld purchases last week, expecting the cash prices to fall as Australian farmers begin harvesting what is expected to be a near-record crop.


Flour millers in Southeast Asia's leading wheat importers such as Indonesia, Malaysia and Thailand are likely to seek cargoes for shipment from January onwards after having covered purchases for this year, regional traders said.


"Freight is going down and the Australian crop is coming out soon. In a couple of weeks, we should see harvest pressure on prices, so buyers are waiting for that," said one Singapore-based executive with an international trading company in Singapore.


Chicago wheat futures dipped on Friday (Nov 4) as the market was pressured by forecasts of crop-friendly weather in the US and expectations of a near-record output in Australia.


Australia is poised to harvest a wheat crop of 26 million tonnes, according to a report issued by USDA attache in Australia, bringing the estimate closer to last year's all-time high output of 26.3 million tonnes.


Farmers in Australia, typically the world's fourth largest wheat exporter, have started early harvest in parts of northern and eastern wheat belt.


In response to strong international demand, Australia's wheat exports surged in 2010-11 to an estimated 18.3 million tonnes, and are forecast to reach a near record 19 million tonnes in 2011-12.


A weakening freight market is also prompting buyers to wait and watch.


Freight rates for smaller panamax and supramax vessels are expected to ease in Asia given ample ship supplies in Indonesia and Australia, according to shipbrokers.


Thai flour millers were seeking 20,000 tonnes of Australian wheat but a deal could not be signed, while Vietnam bought feed wheat in containers from Australia at US$280, including cost and freight (C&F).


"Thailand is making offers for APH1 (Australia prime hard wheat) and ASW (Australia standard wheat), about 10,000 tonnes each," said one Sydney-based trader. "Look at the bulk freight rates, they are cheaper than containers at the moment, it is very aggressive."


Australian prime wheat this week was quoted around US$305 a tonne, C&F, Australian prime hard wheat at US$360 a tonne and Australian standard wheat at around US$290 a tonne, traders said.


This compares with US spring wheat being offered around US$390 a tonne, C&F, to Southeast Asia.


There were reports of India selling smaller volumes of wheat to Sri Lanka in containers at around US$270-275 a tonne, but the deals could not be confirmed.


Asian buyers are focused on Australian wheat harvest and improved weather outlook for US wheat which are likely to add pressure on US wheat futures, on track to register losses following three straight weeks of gains.


USDA's weekly reports on harvest progress and export sales will be closely watched by the market.


US wheat export sales for the week ended October 27 came in at 320,100 tonnes, up slightly from the week prior but exports are down 22% from the prior 4-week average.

Video >

Follow Us