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Asia wheat demand hited by weaker emerging currencies

Weakening currencies in some of Asia’s biggest wheat buyers have hit demand for the grain, with imports across the region likely to fall 5-8 percent in 2015 from a year ago, agricultural commodities trader Agrocrop International said on Tuesday.

Flour mills across Asia are making hand-to-month purchases, with some of them reducing imports, due to declines in local currencies against the U.S. dollar, Vijay Iyengar, managing director of the Singapore-based company, told the Reuters Commodities Summit.

The rupiah currency in Indonesia, the world’s second largest wheat importer, has fallen as much as 19 percent against the dollar in 2015, while the Malaysian ringgit dropped as far as 28 percent. The baht in Thailand, a key buyer of U.S. wheat, gave up about 11 percent.

Local currency weakness makes the cost of greenback-priced wheat more expensive for importers even though the commodity dropped to a four-week low this week on expectations of beneficial rains in the United States and Russia.Wheat imports into Asia rose by about six percent to 42.74 million tonnes in 2014-15 from 40.37 million tonnes in 2011-12, according to U.S. Department of Agriculture data.

Benchmark Chicago corn futures dropped to a five-week low on Tuesday under pressure from a rapidly advancing U.S. harvest, while soybeans are near a one-week trough.

It has been a year of strong Chinese soybean imports as the country rebuilds its herd of hogs. For the first nine months, soybean imports rose 13 percent to 59.65 million tonnes, a record high for the period, data published by the General Administration of Customs showed.

Iyengar said prices of agricultural commodities may have hit bottom with harvests nearing completion in the northern hemisphere, but markets are unlikely to rally because of abundant supplies.“If you look at what is happening in agriculture, most of the northern hemisphere crops are settled,” he said. “People spoke about El Nino but there was not really a full-fledged impact of the weather pattern expect in Australia and India. I don’t see prices rebounding tremendously.”Still, there could be some upside potential for soybeans, Iyengar said.“The soybean market is a function of Chinese demand which has been pretty robust,” he said. “I think you have a greater chance of rebound in soybeans than anything else.”