Wheat may take over from corn as the driver of grain prices next year because of potential production setbacks, said Abdolreza Abbassian, an economist at the United Nation’s Food & Agriculture Organization.
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(Reporting by Niu Shuping and Dominique Patton; Editing by Himani Sarkar)
Graham said he hopes the legal actions lead to a new precedent, "that makes it mandatory that they get approval for exports and trade overseas before they release this stuff out to the farmer and put it in the food chain."
Canadian scientists who believe insecticidal seed treatments are safe are not contributing to the debate over neonicotinoids over fears of how other researchers and environmental groups will react.
Ontario environment minister Glen Murray and provincial environment commissioner Gord Miller said earlier this month that neonics are a greater threat to Canada’s ecosystem than DDT.
Few, if any, Canadian toxicologists and environmental scientists responded.
Canadian scientists who spoke off the record said that publicly challenging these sorts of comments has become hazardous to their careers.
They said that fellow academics and environmental groups launch verbal assaults to destroy their reputations if they say neonics are safe. Consequently, scientists aren’t speaking up to defend neonics because it’s not worth the hostility.
Neonics, which are applied as a seed treatment to almost all corn and canola in North America and a percentage of soybeans, have been linked to bee colony losses across the United States and Canada.
Beekeepers in Ontario filed a $450 million class action suit against neonicotinoid manufacturers Syngenta and Bayer in September, claiming production losses dating back to 2006.
University of Saskatchewan research suggests neonics are present at detectable levels in sloughs and wetlands in Western Canada. The neonics are possibly killing insects that come in contact with the water. A lack of insects reduces the food supply for birds that rely on the insects.
A highly regarded toxicologist said the environmental risks surrounding neonicotinoids are “overstated.” Data indicates they are present in wetlands and other water bodies, but the concentrations are in the parts per trillion, which is essentially nothing.
He said the true “believers and zealots” hype the neonic risk and use “their research to make an issue where none exists, or make it larger to garner press for the ego and funds for the lab.”
Still, the scientist, and others like him, is reluctant to speak up.
An environmental scientist said this case is more unusual than most because the attackers are often other academics.
May Berenbaum, an entomology department head at the University of Illinois and vice-president of the Entomological Society of America, said fellow academics haven’t attacked her reputation, but when she publicly says neonics are not the sole reason behind honeybee decline, she does receive malicious emails from the public, many accusing her of being in the pocket of industry, which she said is not true.
Berenbaum is more shocked that fellow scientists have lowered their academic standards when it comes to neonics. She said prominent journals are publishing sub-standard science on insecticidal seed treatments and bees.
“There are a lot of papers that aren’t, I would say, scientifically bulletproof, that have appeared in very high profile journals…. It’s the classic line. Why is this in Nature? Why is this in Science?” she said.
“That seems to be all over the place, and there certainly are egregious examples…. It appears to be easier to publish a high profile paper that demonstrates adverse impacts of neonicotinoids, than it does to publish a (no effect) paper.”
A Canadian researcher said most reviewers are hostile to insecticide seed treatments, so research showing neonics are safe is highly scrutinized. Meanwhile, papers concluding insecticidal seed treatments are dangerous to bees are less thoroughly judged.
Berenbaum said claiming that neonicotinoids are worse than DDT is a good public relations strategy.
“Even though it’s been banned in the U.S. since 1972, it’s the one they (people) know. It’s familiar and it’s like DDT is the Hitler of pesticides. If it (neonics) is worse than DDT, then it is worse than Hitler.”
This week, Uralkali (OTC:URALL) suspended work at its Solikamsk-2 mine in Russia due to an inflow of salty water. The mine accounts for 20% of the company's capacity and about 3.5% of global output. Solikamsk-2 and the Solikamsk-1 mine are separated by a concrete dam. Under the worst-case scenario, flooding at both the mines will affect Uralkali's capacity by 3 million tons per annum, or 5% of global output. This incident could lift global potash prices, which collapsed after Uralkali broke its trading alliance with Belarus last year. Potash producers are yet to sign contracts with Asian customers for the next year. The potash spot price for China may rise from $305 per ton in 2014 to $340 per ton in 2015. Similarly, the potash spot price for Brazil may rise from $380 per ton to $400 per ton in Q1 2015.
Potash Corp.(NYSE:POT) has annual potash capacity of 12.4 million tons. The company plans to increase its capacity by 2.4 million tons in 2015. We expect Potash Corp. to benefit, since Uralkali's capacity is affected. By the end of 2014, Potash Corp. plans to reduce costs by $15 to $20 per ton compared to 2013. Till now, the company has reduced costs by $18 per ton on a cash cost basis.
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The U.S dollar rose sharply in the last few months on account of positive U.S economic data. The Fed could hike short-term interest rates in mid-2015 if the U.S. economy continues to improve and inflation picks up. We expect that the rising U.S. dollar will add further pressure on the Canadian dollar, which will translate to lower production costs for Potash Corp. in Q4 2014 and in 2015.
Although many 2014 crops are still unpriced, it’s not too early for producers to begin thinking about their 2015 marketing plan. An early read on the 2015 corn crop doesn’t suggest much in the way of a price recovery, with average farm prices of $3.50 per bushel, explains Tim Brusnahan, a vice president of Brock Associates.
“We’re looking at a 2-billion-bushel carryover for at least 18 to 28 months,” putting 2015/16 stocks-to-use at 14.8%, he noted on a webinar earlier this week. His outlook would represent only a slight improvement from USDA’s 2014/15 marketing year estimates of $3.40-per-bushel prices and stocks-to-use of 15.3%.
“We are set up for the potential of a good crop next year,” Brusnahan says. He looks for average or better corn yields based on current conditions. Unlike a year ago in the western Corn Belt, “we don’t have a lack of moisture in Corn Belt states,” he points out. That should set up crops well for April and May, though it’s far too early to make predictions about the critical pollination period.
Still, it’s important for producers to evaluate corn price prospects in the next marketing year to develop risk management strategies, even with a widely anticipated shift to soybean acres in 2015, Brusnahan says.
Demand Lacking For Higher Corn Supplies. Of concern for producers is that “increased supplies aren’t showing robust increases in demand,” Brusnahan cautions. He predicts USDA’s January report will show corn stocks between 11.2 billion bushels and 11.3 billion bushels as of Dec. 1, a new record. It would take a reduction of between 400 million and 500 million bushels in carryover to between 1.4 billion and 1.5 billion bushels for significant price recovery of 50 to 80 cents, and he doesn’t see that happening barring unexpected events. Without carryover reductions, price increases will be limited to about a dime, he projects.
For soybeans, Brusnahan notes the major reason for the rally from October until recently has been speculators combined with net long positions. Longer term, though, he is bearish. For 2015/16, Brusnahan looks for soybean prices of between $7.50 per bushel and $8.60 per bushel. This compares to USDA’s 2014/15 forecast of about $10. Brunahan is bearish on soybeans because he thinks acreage could jump to between 86.5 million and 88 million acres, up sharply from 84.2 million in 2014 and 76.8 million in 2013. He sees 2015/16 stocks-to-use of 22.9%, up from the 14.6% USDA expects for the current marketing year. The recent rally led to increases in farmer selling for spot or January delivery, he says. As a result, soybeans have edged lower.
Ethanol Challenges Persist. For corn demand, Brusnahan projects significant challenges for ethanol growth. In large part, that’s because the U.S. Energy Information Administration projects less gasoline use in four of the next five quarters. That could reduce U.S. ethanol demand, as the blend wall limits the fuel to 10% of gasoline use.
“If ethanol stocks get too high, production will have to come down. Ethanol looks flat to us,” Brusnahan says. To maintain and grow use, ethanol exports are needed. A recent quarterly report from Archer Daniels Midland (ADM) adds perspective. ADM predicts stable U.S. ethanol use next year at 13.5 billion gallons but says exports could increase as much as 25% from an expected 800 million gallons this year.
Another problem for the ethanol industry is that China has “flat-out stopped distillers dried grain (DDG) imports from the U.S.,” he explains. Discussions on lifting sanctions didn’t go well, he adds, though long-term he thinks China could emerge as a major DDG customer. In the U.S., DDG use is under pressure because corn has become more competitive. “Corn is cheap and its quality is good,” he says.
USDA’s Nov. 10 outlook predicts only marginal increases in exports during the just-begun marketing year, which pins major hopes for increases in corn demand on U.S. feed use. “We’re not seeing strong growth in livestock,” he explains. “Feed use is off to a low start.”
Livestock Expansion Ahead. Although livestock expansion hasn’t occurred yet in a major way, it will start to play out in 2015, says Thomas Elam, Farm Econ. With feed costs down 50% from 2012, low interest rates and an 8% increase in per capita meat and poultry purchases by consumers, “everything is lining up for expansion,” he says. “Cheap feed makes cheap meat.”
Moreover, meat export demand has increased sharply over the past decade, though a stronger U.S. dollar looms as a concern. The only question is how fast demand comes back. For pork, a key barrier to expansion has been the porcine epidemic diarrhea virus (PEDv). Its prevalence this winter will have a major effect on how fast production and feed use bounce back, Elam says.
The recovery will take time because of a smaller breeding herd, brought about by a decline in per capita meat consumption in 2008 and low profitability for producers. Reduced supplies might have created as much as 15 pounds per capita of unmet meat demand, Elam says. Moving forward, he predicts an increase in poultry demand; a flat pork market; and a declining market share for beef, whose production increases won’t occur for several years.
NEW YORK – Based on the high-flying performance of the chicken industry as of late and the cyclical nature of the business, an executive with the parent company of Wayne Farms, Oakwood, Ga., said taking the country’s sixth-largest poultry company public isn’t out of the question. According to a report in the Financial Times, Paul Fribourg, chairman and CEO of Continental Grain Co., discussed in a New York forum how the current commodities cycle for chicken favors consideration of a public offering for the company. Market conditions have shifted dramatically from several years ago when feed prices were high and chicken prices lagged.
The Federal Reserve may force banks to boost capital for their commodities businesses and improve disclosures after a Senate investigation found Wall Street’s role in energy and power markets could threaten financial stability.
In prepared remarks for a Senate hearing today, Fed Governor Daniel Tarullo said banks' control over assets such as oil, coal, aluminum and uranium poses “unique risks” that the central bank is seeking to rein in. The Fed plans to move forward on new regulations next year, he said.
“We are exploring measures such as additional capital requirements, enhanced risk-management requirements, and additional data collection and reporting requirements on physical commodities activities to help ensure that such activities do not pose undue risks,” Tarullo said.
This week, a Senate panel released findings from a two-year investigation that concluded Wall Street’s role in owning commodities provided unfair trading advantages and could threaten the financial system if a bank’s business suffered an industrial catastrophe. Tarullo faces questions today over why the central bank allowed lenders to erode what was once a strict line separating banking from commercial activities.Weak Oversight
The Fed has drawn criticism from senators who allege it engaged in weak oversight over the last decade as banks expanded into new businesses involving aluminum warehouses, coal mines and trading in electricity and uranium.
“You’ve got to restore the separation,” U.S. Senator Carl Levin, said in an interview yesterday after he grilled executives from Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley (MS) at a hearing in Washington. “It’s gone way too far this integration. I don’t like the idea, frankly, of these banks being in physical commodities.”
The Senate Permanent Subcommittee on Investigations’ 400-page report said the Fed has “a current lack of effective regulatory standards” and an “uncoordinated, incoherent patchwork” of limits on banks.
A bank shouldn’t “ever be able to corner 80 percent of the world’s supply of any commodity and that should have come to the attention of the regulators,” Senator John McCain, the panel’s senior Republican, said in an interview yesterday. “We pass laws that appoint those regulators and obviously they didn’t choose to act.”Higher Prices
At yesterday’s hearing, Levin sparred with Goldman Sachs (GS) executives for more than two hours over aluminum trading contracts between a bank warehouse subsidiary and clients. Levin said the deals led to long wait times for customers to get their aluminum out of warehouses, leading to consumers paying higher prices for the metal.
Jacques Gabillon, head of Goldman Sachs’s global commodities principal investments group, rejected the accusation.
“When everything is said and done, you can say there is no correlation” between wait times and price, Gabillon said.
Levin, a Michigan Democrat, responded that the executives were “in a very different mathematical world” if they wouldn’t acknowledge the connection.
The Senate report referenced a 2012 Fed study of four banks that found each had capital and insurance shortfalls for commodity units of as much as $15 billion. That meant that if each bank experienced a catastrophe on the scale of BP Plc (BP/)’s 2010 oil spill in the Gulf of Mexico, they couldn’t cover the losses, the report said.New Limits
The Fed, as part of its consideration of new limits on the businesses, is weighing regulations for extra capital and insurance for banks’ commodity businesses.
Banks have moved to sell commodities units amid the scrutiny and revenue from the businesses has tumbled by two-thirds from peak years.
Goldman Sachs produced $1 billion of revenue from its commodities unit and investments in commodity businesses in 2012, down from $3.4 billion in 2009, according to the Senate report, while Morgan Stanley’s commodity revenue fell for four straight years, from $3 billion in 2008 to $912 million in 2012.
Goldman Sachs said it is looking to sell the warehouse subsidiary and will wind down an uranium-trading unit after the bank didn’t receive acceptable bids when it put the business up for sale. The bank is also considering selling coal mines in Colombia, according to the report. Meanwhile, JPMorgan (JPM) has been selling off large portions of its physical commodities business.
In a Chick-fil-A-worthy twist in the battle of cow vs. chicken, the beneficiary of record-high beef prices appears to be poultry producers. Consumers have traded down to less expensive meats such as chicken. Boneless chicken breast, for instance, is 3.5 percent cheaper per pound compared with the price in September 2013. And poultry prices will likely stay low: The USDA predicts the poultry supply will grow almost 2.8 percent in 2015.
Domestic beef production has been waning for years because of rising feed and energy prices. A drought in 2012 caused feed prices to spike and, in response, farmers thinned their herds. Corn prices have finally started to drop, and ranchers have begun to restock, but prices will stay high for a while. Unlike chicken, which can be ready for slaughter two months after birth, cattle take 16 to 18 months to be ready for market.Tyson’s Smith said the company is forecasting cattle supplies to be down about 4 percent in 2015, “but that should be the worst of it.” By 2016, Tyson expects supplies will be down no more than 1 percent.
China cut benchmark interest rates for the first time since July 2012 as leaders step up support for the world’s second-largest economy, sending global shares, oil and metals prices higher.
The one-year lending rate was reduced by 0.4 percentage point to 5.6 percent, while the one-year deposit rate was lowered by 0.25 percentage point to 2.75 percent, effective tomorrow, the People’s Bank of China said on its website today.
The reduction puts China on the side of the European Central Bank and Bank of Japan in deploying fresh stimulus and contrasts with the Federal Reserve, which has stopped its quantitative easing program. Until today, the PBOC had focused on selective monetary easing and liquidity injections as China heads for its slowest full-year growth since 1990.
“It’s absolutely the right thing to do,” said Wang Tao, chief China economist at UBS AG in Hong Kong. “Real interest rates have moved up significantly with slowing growth and inflation, which hurts corporate cash flow and balance sheet and threatens to increase non-performing loans.”
The MSCI All-Country World Index advanced 0.2 percent at 11:21 a.m. in London, with the Stoxx Europe 600 Index rallying 1.3 percent and Standard & Poor’s 500 Index futures up 0.5 percent. Oil rose for a second day as copper climbed 1.1 percent.Prudent Policy
“This interest rates adjustment is a neutral operation and doesn’t mean any change in monetary policy direction,” the central bank said in a statement on its website explaining the rate cuts. As China is still able to keep medium to high growth rates, it “has no need to take strong stimulus measures, and the direction of prudent monetary policy won’t change,” the central bank said.
The cut in the benchmark rates follows liquidity injections and targeted cuts to reserve requirements. Although the PBOC scrapped controls on most borrowing costs in July 2013, banks still use benchmark rates as a guide for loans including mortgages.
The PBOC was said to have added money to the banking system today as a cash shortage stemming from new share sales drove the benchmark money-market rate up by the most since July. On Nov. 6, it confirmed it pumped 769.5 billion yuan ($126 billion) to the country’s lenders via a newly-created tool called the Medium-term Lending Facility, including 500 billion yuan in September and 269.5 billion yuan in October.Ineffective Measures
“All the targeted easing measures or the mini stimulus measures to cut the cost of financing are in fact ineffective,” said Chang Jian, chief China economist at Barclays Plc in Hong Kong, who correctly forecast one interest rate cut in the fourth quarter of this year. “So the only way to really reduce the cost of financing is through cutting the benchmark rate.”
Data released Nov. 13 showed the economy’s slowdown deepened in October. Factory production rose 7.7 percent from a year earlier, the second weakest pace since 2009, while investment in fixed assets such as machinery expanded the least since 2001 from January through October. Retail sales gains also missed economists’ forecasts last month.
Aggregate financing in October was 662.7 billion yuan, the central bank said Nov. 14 in Beijing, down from 1.05 trillion yuan in September and lower than the 887.5 billion yuan median estimate in a Bloomberg survey of analysts. New local-currency loans were 548.3 billion yuan, and M2 money supply grew 12.6 percent from a year earlier.‘Positive Move’
The rate cut is “indicating the worsening economic situation and rising deflation risk,” Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong, wrote in an e-mail. “A positive move for the economy, and I expect RRR cut to follow in December,” referring to the reserve ratio requirement for banks.
Today’s move suggests a shift toward pro-growth policies that may fuel even more debt. An unprecedented lending spree from 2009 to 2013 led to a surge in debt on a scale that’s triggered banking crises in other economies, according to the International Monetary Fund.
China’s total debt reached 251 percent of gross domestic product as of June, up from 234 percent in 2013 and 160 percent in 2008, according to Standard Chartered Plc estimates.
The PBOC’s easing comes as Mario Draghi says the European Central Bank must drive inflation higher quickly, and will broaden its asset-purchase program if needed to achieve that. Meanwhile, Fed officials are weighing whether they should communicate more of their views about the probable pace of interest-rate increases after they lift off zero next year.
“Certainly, the divergence between the major economies is going to a major feature of the next few months,” said Mark Williams, Capital Economics’s chief Asia economist in London. “It’s relatively, and historically, unusual for the major central banks moving in different directions like this
Elevators around the Corn Belt are using temporary and emergency storage to hold this year’s massive crop, but some farmers are trying to cut additional holding and drying costs by bagging their own grain.
Harvest may be over, but the work for Grant Noland isn’t.
“Our model is we try to keep majority of our grain on farm. It’s a risk on our side but it allows us to capture a higher price point at a later point of the year,” said Noland.
For the first time, the central Illinois farmers is storing his grain horizontally in bags, as a way to cut storage and drying costs at the elevator.
“Present point, we are pretty full close to being full of our storage. We put bags out as a means to get us through maybe twenty percent of our harvest,” said Noland.
He’s hoping to take advantage of a possible higher market down the road.
“It’s been nice to try to capitalize and taking those bushels and maximize on them,” said Noland.
He says others in the eastern Corn Belt are going that route, too, something Noland hasn’t seen much of in his area until now.
“At the local facilities, the ground piles, you see those every year with big yields. You don’t see it on the producer level,” said Noland.
Noland estimates he’s saving about 40 cents a bushel by storing in bags instead of a local elevator. The bag loader however is a big expense, ranging in price from $25,000 to $40,000.
“If you load constant grain to it, it will probably fill about 15,000 bu. an hour. It is just keeping grain coming at that pace,” said Noland.
It’s an expense he feels is worth it.
“The local facility levels commercial storage rates increased. Drying rates are not decreasing in costs. So for us, we had to make the decision for an alternative option,” said Noland.
Because he’s trying to capture the carry, his goal is not a long term storage solution, but long enough to do what the market tells him.
“Our plan is to at some point, between now and February, we’re going to have the opportunity to move grain. We will probably move upright storage to the market place and pick up our storage and put in the upright storage,” said Noland.
Noland thinks a new era of bagging may be beginning and hopefully his work is worth it.
“I think it’s something we will do on an annual basis,” said Noland.
Noland says the market gave him a chance to move some grain early because of the October rally. He says he dried all of the grain, so he’s not worried about it spoiling.
However, Farmland Partners points to data,mgoing back to 1992, from real estate agents which shows farmland returns, factoring in rental income, never turning negative for a whole year.
The predicted shrinkage in EU output should also be offset in part, experts say, by Spanish stocks left over from last year's record yield.
The same mine had previously collapsed in January 1995, causing gas explosions in surrounding areas the following day, according to the CDC. Sudden, disastrous events like these are not uncommon in salt mines of this type and can happen even if miners take all the proper precautions.
According to Russian news site V-Kurse, several homes are located nearby the sinkhole, but it remains “unknown whether there were homes in the [sinkhole's] epicentre.”
At least one Russian Twitter-user, however, suggested homes may have been destroyed. In a tweet, Evgeny Andreev writes “Good luck cottagers,” referring to the people living in the residences in the area.
Low prices for years is the most reasonable expectation for farmers, analysts said last week at Cereals North America.
It was a dark thread that wound through a conference that contained few hopeful elements. A crop-heavy world situation has exacerbated logistics problems in Canada and the United States, and there are hints that Canada’s quality, consistency and reliability have been undermined in world markets.
“This is going to be a slog, we expect,” said AgResource president Dan Basse, who forecasted corn prices of $2.75 to $4.75 for the coming years unless a major production area suffers an “extreme drought.”
“The world lacks a bullish demand driver.”
Fellow AgResource analyst Bill Tierney said 2014-15 soybean prices will likely drop to $8.50 per bushel for March futures if South America’s crop is as big as expected.
The situation could worsen if the present soybean rally, driven by soybean meal shortages, convinces American farmers to plant an in-creased soybean acreage in spring.
“I think there’s a very strong likelihood we’re going to see soybean prices below the $7 level next year at harvest,” said Tierney.
The Prairies produce only small amounts of corn and soybeans, but those two crops set the price for cereal grains, such as wheat and oats and oilseed crops such as canola.
The grim outlook is based on huge stocks likely remaining at the end of 2014-15.
Tierney said his preliminary analysis of vegetable oil crops and vegetable oil stocks shows that world supplies are at all-time highs, with supply exceeding demand by 24 percent.
“The world’s largest exporters of soybeans and soybean meal are going to see a sharp increase in their ending stocks,” said Tierney.
From 2006-13, crop markets were driven by overall high commodity prices and biofuel-promoting government policies. More corn was required to support the ethanol and biodiesel mandates.
However, that factor has evaporated.
“Corn prices had to rally every year to buy more acres just to meet the ethanol demand that was being built up,” said Basse.
“We don’t need that extra three to seven million acres every year (any longer.)”
The Cereals North America conference also heard that Canada’s west coast ports will likely remain clogged this winter. The U.S. rail system is also becoming backed up.
Derek Sliworsky, a former CWB Asian representative who now works for a miller and food processor in Singapore, said buyers at his company told him Canadian grain was not only late because of rail problems on the Prairies, but also arrived with far less consistent quality than in the past.
He said his company, Prima Group, had to deal with problems such as soybeans mixed into wheat and variable weights of formerly uniform shipments, which at times prompted it to turn to other countries for supplies.
Canada’s quality-damaged crops were also discussed, but CWB’s Bruce Burnett was more positive about the outlook than many have been. He said not all farmers harvested bad quality spring wheat, and that feed grain supplies, while ample because of downgrading, are not burdensome.
“There is quality grain available in Western Canada on the CWRS side,” said Burnett.
Canada Western Red Spring and durum protein levels are adequate for most buyers, even if quality of much durum is low.
Much of the lowest quality wheat, durum and oats will end up in the feed market, but Burnett said there probably won’t be substantial feed grain exports from Western Canada because feed grain demand on the Prairies is good.
“We’re going to basically use most of this up,” said Burnett.
Weather analyst Scott Yuknis of Climate Impact said the world is entering a period that could cause “harsh droughts” in some areas that would last two to three years at a time.
“Once it begins, it lasts,” said Yuknis.
It would be bullish for prices, but obviously only beneficial for prairie farmers if it doesn’t hit them.
Basse said the big picture of world crop supplies and demand is that the long-term commodity bull market is over and that today is more like the 1990-2005 era.
“This will go on for a number of years,” Basse said.
Singapore | Reuters — Asian flour millers are looking at buying Canadian spring wheat for shipment early next year as supplies from drought-hit Australia are likely to remain slow, traders said.
Canadian western red spring wheat is being offered at around $345 a tonne, including cost and freight, nearly unchanged from last week, while Australia prime hard wheat is being quoted at $370 (all figures US$).
“A lot of mills have taken Black Sea wheat in Asia and now they need higher-quality wheat for blending,” said one Singapore-based trader. “Canadian spring wheat is ideal for blending and it can easily replace Australian hard wheat.”
Australian farmers are holding back wheat crop sales as dryness cuts yields in parts of the country’s eastern grain belt that is responsible for producing high-protein hard wheat.
Farmers have sold about a quarter of this year’s crop even as the harvest gathers pace with analysts pegging sales at 50 per cent of output by December-end versus about 70 per cent last year.
“We will be facing competition in bulk vessels as Australia has only limited supply of high-protein wheat, so there will be competition from the U.S. and Canada,” a Sydney-based trader said. “But Australian quality is much better because of the dry finish to the crop and there are concerns over rain damage to the Canadian crop.”
Canadian wheat sales into Asia could be limited on concerns over logistics as winters slow down the movement of cargoes, traders said.
The Taiwan Flour Millers’ Association has purchased 82,050 tonnes of milling wheat to be sourced from the U.S. in a tender this week, for shipment between January and February.
Chicago Board of Trade soft red winter wheat futures have dropped 2.8 per cent this week, while higher-quality spring wheat traded on the Minneapolis Grain Exchange has fallen by just around one per cent this week.
For lower quality wheat, buyers are likely to turn to India next year as supplies from the Black Sea region slow down, traders said.
“There are not many offers of Black Sea wheat, we have only a few offers from Ukraine but nothing much from Russia,” a second trader said in Singapore.
Ukrainian wheat with 11 per cent protein is being offered at $275-$280 a tonne, C+F, but not many deals have been reported this week in Asia.
– Naveen Thukral reports on crop commodity markets for Reuters from Singapore.
The issue has been a subject of conflict of Argentinean farmers and the government for several years because of the extreme need of foreign reserves in the country and the Kirchner administration’s ideology.