Falling wheat prices encourage Asian customers to buy

Asian wheat buyers have stepped up purchases in recent weeks, taking cargoes from the Black Sea region as they returned to the market after a long gap, drawn by a fall in global prices.

Regional millers producing flour and animal feed have signed deals to buy close to one million tonnes of wheat to be shipped from Bulgaria, Russia, Romania and Ukraine in August and September, according to two Singapore-based traders.

“Millers have been active, we have seen good demand as prices have dropped significantly,” said one of the traders.

“Black Sea wheat is in good demand for milling, as well as animal feed.”

Wheat buyers had cut purchases and were running on thin supplies after global prices rallied earlier this year.

Global wheat prices jumped in April with expectations of lower output in Russia, the world’s No. 1 exporter, following fears of crop damage from frost and dryness in key growing months.

While grain processors in Bangladesh and Indonesia are taking Black Sea wheat largely to mill into flour, importers in the Philippines, Thailand and Vietnam have been booking feed wheat cargoes, traders say.

China, the world’s biggest wheat importer, has been buying larger volumes during much of this year, but it typically sources the grain from Australia, Canada and Europe.

Higher quality Black Sea wheat with 11.5 per cent protein content for making flour traded at $265 to $270 per tonne, compared with $300 to $310 quoted in May.

Animal feed wheat is being traded at $255 to $260 a tonne, the traders said.

“The wheat market has come down as fast as it went up,” said the second trader in Singapore. “Most of the big importers in Asia bought and covered their requirements until the third quarter.”

In the latest deals, Bangladesh bought four panamax cargoes, or about 200,000 tonnes, of Russian wheat this month for shipment in August and September.

Asia is a net importer of wheat, accounting for about 30 per cent of the grain shipped worldwide, data from the U.S. Department of Agriculture shows.

In June, the market gave up much of its gains from the earlier rally as better-than-expected yields in Russia and higher production in the United States weighed on prices.

Chicago wheat futures have dropped by more than a fifth since the beginning of June, wiping out almost all the gains of April and May.

Tags: Black Sea region, wheat, purchases, cargoes, animal feed, demand, Ukraine, milling, Russia, Bulgaria, Romania, prices