November 29, 2012


US wheat exports to fill supply gap as Black Sea resources drain


As the Black Sea supply was affected by drought, Asian grain traders have their eyes fixed on the weather and are looking to the US to fill the gap.


Demand for US wheat should return in the coming months as supply from the former Soviet Union and Europe runs out, Macquarie Commodities said in a note Wednesday.


"We should continue to see a turnaround in US origin export sales in the coming months. In the last couple of weeks US wheat prices have become more competitively priced internationally. Australian origin wheat will keep a cap on any US export demand related price rallies."


Overnight, Chicago Board of Trade March wheat futures climbed US$0.2475, or 2.9%, to US$8.885 a bushel, buoyed by concerns about unfavourable weather for US Great Plains crops.


Wheat futures had fallen earlier in November on a cut in export forecasts by the USDA but have recently begun to improve again on hopes for more export demand.


The department reported wheat export sales of 657,400 metric tonnes in the week through November 15. Analysts had expected sales of 200,000-450,000 tonnes. In recent weeks, wheat export sales have generally been poor as other countries have undercut US prices.


An increase in Australian exports to 8.5 million tonnes from 2.5 million tonnes from June-September displaced corn demand rather than other-origin wheat, Macquarie said.


"We do not see this trend continuing into the 2012-13 season as Australian supplies have diminished."


Demand for Australian wheat is falling in Asian markets as prices of the other food staple, rice, have "largely failed to rally" with rice prices falling 20% from a year ago in the past 12 months, while prices of imported wheat to Asia have risen 20% from a year ago, ANZ Research said. Asian countries have also sought wheat from elsewhere.


Indonesia, one of the world's largest wheat importers, is replacing Australian wheat with Indian grades to cut costs owing to a rise in global prices. The country's overall imports are forecast to rise 6.5% to more than six million tonnes in 2013, a top industry official said late Monday (Nov 26).


"Indian milling wheat at US$350/tonne basis cost and freight is US$10-15/tonne lesser than the cheapest Australian wheat and its imports are on the rise but supply will have to be consistent for this to become a long-term trend," Indonesia Flour Millers Association Chairman Franciscus Welirang told Dow Jones Newswires. India tends to restrict or permit exports depending on local supply and prices, he added.


Meanwhile, China's wheat imports are rising, and will likely grow 10% next year to three million tonnes, a senior official at an institute affiliated to the country's agriculture ministry said Tuesday (Nov 27).


"The balance of demand and supply of wheat is tightening due to rising consumption and a decrease in acreage," Bi Jieying, assistant professor at the Chinese Academy of Agricultural Sciences, said on the sidelines of a grains conference.


The growth potential for the domestic wheat yield is limited and the amount of acreage available has declined steadily after peaking in the early 1990s, she said.


Wheat imports have more than doubled this year amid rising demand for animal feed, according to the institute. Demand for feed next year will likely total 12.4 million tonnes, up 6% from this year's forecast total.


China's wheat output is forecast at 118.3 million metric tonnes next year, little changed from the 118.1 million tonnes forecast for this year, she said. Consumption is expected to rise to 119.6 million tonnes in 2013 from 119.1 million tonnes in 2013, she said.