(Reuters) - Some Asian flour mills are looking to lock in wheat supplies until well into the middle of 2019, potentially shaking off a years-long trend for hand-to-mouth buying as global output is set to drop for the first time in six years.
World wheat supplies are forecast to tighten in the second quarter of 2019 as shipments from top exporter Russia slow following rapid sales earlier in the season, while cargoes from No.5 supplier Australia are expected to dwindle after scorching weather hit crops there.
That would leave the United States and Canada as key wheat exporters in the April-June period, likely pushing up benchmark prices for the grain.
“Mills want to make some forward purchases as U.S. and Canadian wheat next year will come at a price,” said a Singapore-based trader at an international grain trading company.
“We are expecting a supply squeeze to come after March.”
Wheat millers from Indonesia, the world’s second-largest importer, and Thailand have been in the market this week looking for shipments arriving in April and beyond, said the source and another trader in Singapore.
“We have had enquires and expect some deals to be signed in the coming weeks,” said the second trader.
Both traders declined to be identified as they were not authorized to speak with media.
Such longer term buying would mark a contrast to the last few years when most Asian millers have purchased wheat just a few months in advance amid abundant supply from record crops.
Asia is the world’s biggest consumer of wheat. Demand is expected to top more than 300 million tons during the 2018-19 crop year, a record over 40 percent share of global consumption, according to U.S. Department of Agriculture (USDA) forecasts.
Asia is also the top importer, with shipments of the grain set to hit 55.13 million tons this year, up 46 percent since 2010-11 and the second-largest total on record, USDA data showed.
U.S. Soft White wheat was quoted this week at $275 a ton, including cost and freight (C&F), for April arrival in Southeast Asia, Hard Red Winter wheat is being priced at $290 a ton and Hard Red Spring wheat at $296 a ton. All U.S. varieties are currently around $5 a ton higher than prices being quoted for delivery in December, traders said.
The USDA estimates world wheat output will drop to 730.92 million tons in the year to June 2019, compared with a record 758.74 million tons in 2017-18. Global production has marked successive all-time highs since 2013-14.
Australia has been grappling with a second year of drought, with exports forecast to decline to around 10-12 million tons this year, just half of the record sales total of more than 22 million tons in 2016/17.
“Australia’s exports are going to be lower this year and Russia is expected to run out of surplus by early next year,” said Phin Ziebell, an agribusiness economist with National Australia Bank.
“The U.S. will be the key exporter until the next northern hemisphere crop comes into the market in July.”
Reporting by Naveen Thukral; Editing by Joseph Radford
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