(Reuters) - Suppliers of Australian wheat have signed one of the first deals to export the crop due to be harvested in the next couple of months, helping kick off this year’s export program after more than three months of delay.
The contract to supply Vietnam with 30,000 tonnes of Australian Premium White (APW) wheat was signed at $252 a ton, including cost and freight, for arrival in December, said two trade sources.
Exporters typically start selling Australian wheat around July for the crop to be harvested in November and December. But that was delayed this year after one of the worst droughts in decades drove up local prices for the grain, hitting demand from buyers abroad.
But global inventories at historically high levels have forced suppliers in Australia, the world’s No.4 exporter, to reduce prices to match the international market and win business.
Prices for Australian wheat were this week being quoted at around $232 a ton, free on board, compared to $250-$260 previously.
“Australian prices have come down in the last week or so,” said a Singapore-based trader with an international trading company.
“We expect more deals to be signed as Asian mills need some volumes of Australian wheat, Black Sea (grain) on its own is not enough,” he added, declining to be identified as he was not authorized to speak with media.
Australian wheat is popular with flour millers in several Asian countries, including Indonesia, the world’s second-largest importer.
“By this time last year Australian exporters had sold close to 3 to 4 million tonnes of wheat,” said a second trader in Singapore.
“This year we are just talking about a few deals as of now.”
Australian wheat crop yields are forecast to decline to 1.72 tonnes per hectare in the 2017/18 season, according to estimates from the U.S. Department of Agriculture, down 36 percent from the previous year’s record 2.7 tonnes per hectare.
But traders said some improvement in yields could be possible after rains over the last few weeks.
“These rains will not make a huge difference as the crop is pretty much made in most areas,” said the second Singapore trader. “(Although) some relief is expected to the southern and western parts of the country.”
The country’s wheat output is expected to drop to 20.15 million tonnes in 2017/18, more than 40 percent lower than last year’s all-time high of 35.56 million tonnes, according to a Reuters poll.
Australia will still have close to 17-18 million tonnes of surplus to export in 2017/18 with domestic consumption at around 7-8 million tonnes and last year’s closing stocks at 6 to 7 million tonnes.
Reporting by Naveen Thukral; Editing by Joseph Radford