December 12, 2008

Asia Grain Outlook on Friday: Large producers look for ways to sell wheat

Russia, Australia and India, among the biggest global wheat producers, are seeking ways of offloading their bumper output at a time when slowing economic growth is crimping demand.


The Russian government has approved measures including reducing rail tariffs, tax breaks and possibly even subsidies to stimulate wheat exports. The plan has alarmed Australian exporters, grappling with the country's biggest wheat crop since 2005. Australia competes with Russia and the U.S. to sell wheat to several Asian countries.


Meantime, India, which is typically a net importer of wheat, has decided to allow exports of around 11,000 metric tonnes to its neighbors - Nepal and Myanmar. India will ship 10,000 tonnes to Nepal and 950 tonnes to Myanmar.


Asian grains importers are buying more feed wheat this year as wheat prices have fallen, cutting back on corn imports, which is traditionally a major ingredient for animal and bird feed.


"Feed wheat has as much nutritional value as animal, bird feed as corn, so if we get cheap feed wheat, then we will use it," said a South Korean feed mill company executive.


He added that while South Korean feed companies are well stocked in grains until February, millers are now cautiously buying grains for March shipment.


"It's hand to mouth buying, no one is stocking up on grains as credit is scarce for importers," said the executive.


He further added that while cheap feed wheat is being largely sourced from Ukraine, South Korean millers continue to buy U.S. corn, as the U.S. Department of Agriculture provides credit on easy terms to grains importers.


In deals this week, the Korea Feed Association bought 55,000 metric tonnes of feed corn and 55,000 tonnes of feed wheat.


The association bought the corn from trading house Feednet at US$153/tonne while wheat was bought from Concordia at US$127.60/tonne, both on a cost and freight basis.


Both shipments are for March delivery.

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