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Australia set for record wheat crop
Dec. 1, 2016
Australian wheat suppliers are poised to regain market share in Asia as the world’s No.4 exporter harvests what is likely to be a record crop, threatening to rein in shipments to the region from rival Black Sea producers.
Australia has in recent years surrendered some of its share of major wheat markets such as Indonesia, with sellers from Russia and Ukraine offering cheap cargoes.
But the country is set to boost exports to Asia as it is forecast to churn out around 31-32 million tonnes of wheat in 2016-17, beating the previous record of 29.9 million tonnes set five years earlier.
“We are priced competitively to catch the demand that is on our doorstep in Southeast Asia,” said Matthew Pattison, a manager at trading company Nidera Australia in Brisbane.
Australian standard wheat with nine-percent protein was this week quoted at $185 a tonne, free on board. Although that is more than a similar variety of Ukrainian wheat offered at $178-$180 a tonne, Australia typically has a freight advantage in Asia over Black Sea suppliers of about $10 a tonne.
“(It) has already hit Ukrainian exports to the region,” said a foreign trader based in Ukraine, declining to be identified as he was not authorised to speak with media.
“There is almost no demand for Ukrainian grain (in Asia) because most of the needs are covered with grain from Australia and Argentina.”
Wheat harvesting has gained momentum in recent weeks across Australia, with initial results showing better-than-expected yields, traders and analysts said.
“I think farmers have harvested around 50 percent of the crop which is getting bigger than what everyone expected,” said Ole Houe, an analyst at brokerage IKON Commodities in Sydney.
“We may well receive 9-10 million tonnes of grain across all states this week.”
That marks a turnaround from a few weeks ago when producers feared rains would delay the harvest and threaten crop quality.
“Protein levels are much higher than what everyone thought,” said a Sydney-based trader. “We have more wheat with 10.5- to 11-percent protein.”
Australia had been expected to produce more wheat with around 9- to 10-percent protein.
A weaker Australian dollar – down about two percent against the greenback this month – is also boosting the appeal of exports from the country.
The Philippines, which has bought over 440,000 tonnes of wheat from Ukraine between July-September, according to consultancy UkrAgroConsult, has been taking Australian standard wheat in recent tenders.
The world has been awash with wheat supplies and the U.S. Department of Agriculture has estimated all-time high global inventories at the end of the crop-year in June 2017 at nearly 250 million tonnes.
Benchmark U.S. wheat futures slid to a 10-year low in August and since then the market has struggled to recover.
Source: Reuters
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