Locked up: Asian steel companies seek to secure long-term wheat supplies

(Reuters) – Some Asian flour mills are looking to limit their wheat supplies until mid-2019, which could undermine a multi-year trend for word-of-mouth purchases as global production is expected to drop for the first time in six months. years.

Global wheat supplies are expected to contract in the second quarter of 2019, as shipments from the main Russian exporter slowed as a result of earlier sales earlier in the season, while shipments from the No. 5 supplier Australia, are expected to decline as a result of poor weather conditions.

This would leave the United States and Canada among the top wheat exporters between April and June, which would likely push up the grain reference prices.

"The factories want to buy futures, because the US and Canadian wheat will have a price, next year," said a Singapore-based trader in an international grain trading company.

"We expect a tightening of supply after March."

Indonesian millers, the world's second largest importer, and Thailand are on the market this week looking for shipments arriving in April and beyond, said source and another trader in Singapore.

"We have had inquiries and we expect contracts to be signed in the coming weeks," said the second operator.

Both traders refused to be identified because they were not allowed to speak to the media.

Go long

These long-term purchases would contrast with the past few years, when most Asian flour millers had bought wheat a few months in advance when harvests were plentiful.

Asia is the largest consumer of wheat in the world. Demand is expected to exceed 300 million tonnes during the 2018-2019 crop year, a record share of more than 40% of world consumption, according to US Department of Agriculture (USDA) forecasts.

Asia is also the largest importer, with cereal shipments to reach 55.13 million tonnes this year, up 46 percent from 2010-2011, and the second highest in total, showed data from the USDA.

In the United States, soft white wheat was estimated this week at $ 275 per tonne, including transportation and shipping costs. For its arrival in April in Southeast Asia, winter hard red is sold at 290 dollars per ton and durum wheat at 296 dollars per ton. All American varieties currently cost around $ 5 per tonne more than the December delivery prices, traders said.

The USDA estimates that global wheat production will fall to 730.92 million tonnes by June 2019, from a record 758.74 million tonnes in 2017-18. World production has reached record highs since 2013-2014.

Australia is struggling with a second year of drought. Exports are expected to fall to around 10-12 million tonnes this year, half of the record sales of more than 22 million tonnes in 2016/17.

"Australia 's exports will go down this year and Russia is expected to deplete its surpluses by the beginning of next year," said Phin Ziebell, an agri – food economist at the US Food and Agriculture Organization. National Australia Bank.

"The United States will be the leading exporter until the next Northern Hemisphere harvest in the market in July."