* Australian wheat holds firm even as U.S. futures drop
* Market eyes Indian wheat tenders on Nov. 14
* India seen selling 2 mln tonnes of wheat in Jan-March
By Naveen Thukral and Mayank Bhardwaj
SINGAPORE/NEW DELHI, Nov 7 (Reuters) - India’s move to cut wheat export prices has curbed a rally in U.S. wheat futures and cheap cargoes are expected to enter the market after tenders this month, but that is unlikely to erode premiums for higher-quality Australian supplies.
Traders say the Indian supplies will go largely into animal feed or to fill demand for lower-quality milling wheat, while Australian wheat will take care of higher-end demand for making noodles, bread and cakes.
Expectations that India would open the floodgates for wheat have reversed gains in Chicago Board of Trade futures, which have lost more than 8 percent since hitting a near-five-month high of $7.11-1/4 a bushel on Oct. 21.
The spot-month December contract was trading at $6.54-1/4 a bushel at 0640 GMT on Thursday.
“Australia is not expected to have large volumes of feed wheat this year although they have yet to go through the crucial harvest season,” said one Singapore-based grains trader. “Indian wheat is going to be selling at a discount to U.S. soft red winter wheat and Black Sea wheat.”
Australian wheat prices have held up thanks to strong demand led by China, which saw some 16 percent of its crop damaged by adverse weather earlier this year.
Australian prime wheat was quoted this week around $290 a tonne, free on board, while prime hard wheat with 13 percent protein was being offered around $351 a tonne.
“They probably won’t steal a lot of business away from Australia. Indian wheat will enter the feed market while even our lower-quality Australian standard wheat will be bought by flour millers,” said Andrew Woodhouse, a grains analyst at Advance Trading Australasia.
On Oct. 30 India cut the floor price for exports of 2 million tonnes of wheat from government warehouses by 13 percent to $260 a tonne..
The three state-run traders will now test the water on Nov. 14 when bids close for the first round of tenders since that price cut, aimed at boosting shipments from the world’s second-biggest producer of the grain.
Traders believe India will get a strong response.
“After a long time, Indian wheat will be competitive in the world market, thanks to the decision of the government to lower the floor price for exports,” said a New Delhi-based trader at a global trading company.
“Those buying Russian wheat could turn to India,” he said.
India is likely to sell up to 2 million tonnes of wheat in the first quarter of 2014, mainly to buyers in the Middle East and Southeast Asia, traders said.
“Right now Indian wheat is the cheapest in the market as not much is being offered from Russia and Ukraine,” said a second Singapore trader. “Importers are likely to bid for Indian wheat at around $275-$280 a tonne.”
In Sept. 2011 India allowed private traders to export wheat again, lifting a four-year ban on overseas shipments of the grain. The government later allowed exports from its own warehouses to help cut stocks lying in open fields.
Since then private traders have exported about 4 million tonnes, while exports from government warehouses have been nearly 4.5 million tonnes. Global wheat trade stands at around 150 million tonnes a year.
Indian wheat is similar to Australian standard, U.S. soft red winter and Black Sea varieties of wheat.
Australia is this year set to produce its fourth-largest wheat crop, beating government predictions, with dry weather in parts of the country’s eastern grain belt boosting quality by helping to produce higher protein scales.
The country’s wheat production will rise 14 percent to 25.3 million tonnes in 2013/14 from 22.1 million last year, according to a Reuters survey of 11 analysts and traders.
Farmers kicked off the harvest in the eastern grain belt last month and more than half of the crop harvested so far has at least 13 percent protein content.
The bulk of Indian wheat has 10-11 percent protein but the stocks about to hit the market have been held in government silos for years, raising questions over quality. (Additional reporting by Colin Packham in Sydney; Editing by Alan Raybould)