Asia to turn to Black Sea wheat after years

SINGAPORE - Reuters

‘Black Sea wheat is going to corner the Asian feed market as it is the cheapest origin as of now,’ a Singapore-based trading manager has said. AFP photo

Wheat buyers in Asia are looking to replace Indian and Australian cargoes in the lower-end feed grain market with cheaper supplies from the Black Sea, which will be returning to the region after a three-year gap.

But quality-sensitive consumers in Asia are unlikely to substitute their food supplies with Russian and Ukrainian grain despite a ban on U.S. white wheat by major consumers Japan and South Korea.
Thailand and the Philippines have already bought some 200,000 tonnes of Black Sea wheat in recent deals for animal feed and traders expect between 2.0 and 2.5 million tonnes to flow into Asia in the year to June 2014.

“Black Sea wheat is going to corner the Asian feed market as it is the cheapest origin as of now,” said a trading manager with an international trading company in Singapore.

“On the milling side there is not too much excitement but they might sell some cargoes here and there to buyers who use low-quality wheat for blending.”

Australia dominated Asia’s animal feed market in 2010/11 and 2011/12 as the country produced large volumes of lower-quality wheat after unseasonal rains for two consecutive seasons. India has been aggressively selling cargoes in 2012/13.

But wheat prices in Australia have firmed in recent months as supplies tighten following robust exports since September.

Thailand bought some 150,000 tonnes of wheat from the Black Sea region this month at around $280-$285 a tonne, including cost and freight, compared with a similar variety of Indian wheat quoted around $320-$325 a tonne, traders said.The Philippines took one cargo of around 50,000 tonnes at $282 a tonne.

Ukraine’s farm ministry has estimated the country’s wheat output will rise to about 20 million tonnes this year, up from 15.8 million tonnes in 2012. Russia’s state forecaster expects its 2013 grain production to increase 31 percent to 93 million tonnes, with the harvest expected to start two weeks earlier than usual.

“We are expecting a bumper harvest in Russia and prices will come under further pressure when harvesting picks up,” said a Moscow-based trader.

Black Sea wheat exports to Asia had dried up in the last three years on lower production in Russia and Ukraine due to drought and in the face of the higher volumes of lower-grade wheat from Australia and India.