Monday, February 6, 2023
HomeFoodAsian buyers grapple for wheat supply amid Russia-Ukraine conflict


To our FREE newsletter
Get all the latest maritime news delivered straight to your inbox.

Asian buyers grapple for wheat supply amid Russia-Ukraine conflict

Global wheat prices have sky-rocketed since Russia invaded Ukraine, disrupting supply from the world’s largest wheat exporting region while boosting Australia’s profile as markets look to shift trade flows.

Australian Premium White, or APW, wheat index jumped by $28/mt since Feb. 23, the day before Russia invaded Ukraine, to $380/mt FOB Kwinana March 2, according to Platts assessments from S&P Global Commodity Insights.

The last time APW hit a record high was on Dec. 6 at $372.5/mt FOB Kwinana on the back of widespread rainfall during peak harvest period.

Australian suppliers were bracing for a surge in export demand as buyers look to replace the loss of Black Sea volumes in the near to medium term.

However, a significant increase in export potential is not expected in the short term as logistics and supply chain from Australia were already under stress from a record-breaking harvest.

In the east coast, grain production has surpassed export capacity and additional carry over from the 2020-21 marketing year (October-September) was straining logistics further. Floods added to the constraints, delaying loading from Brisbane by a week, a trade source said.

The export deficiency stood at about 2 million mt in New South Wales and 1 million-1.5 million mt in Victoria, Graincorp’s trading director, Michael Jester, said during the AGIC Asia conference March 2.

In anticipation of a huge surge in export demand, grain supplier CBH will be offering an additional 540,000 mt of shipping capacity March 4, the co-operative’s head of trading, Benjamin Tiller, said March 2 during the AGIC Asia conference.

Trade sources said that 120,000 mt will be for canola shipping out of Albany, 120,000 mt for ASW1 shipping out of Geraldton and the remaining 300,000 mt for feed barley or ASW1 shipping from Esperance.

These will be for shipping stem between last half April through to last half September.

The 540,000 mt is on top of the expected record 17.1 million-17.2 million mt of grain to be shipped from Western Australia in MY 2021-22. Previously, the highest volume CBH ever shipped out stood at 15 million mt, Tiller said.

To further strengthen its supply chain, CBH has in the week starting Feb. 27 asked farmers in Western Australia to volunteer trucks to help transport grain from farm to ports.

Asian buyers emerge

As the price surge showed no sign of losing steam, buyers have finally returned to the market following close to a week of inactivity.

Feed buyers in Thailand and the Philippines issued buy tenders for feed wheat March 2, and South Korea has followed suit March 3 seeking feed wheat arriving in July.

San Miguel Corporation in the Philippines was heard to have booked a feed wheat cargo at high $380s/mt CFR for June-July shipment via its tender March 2.

No offers were heard made to Thai Feed Millers Association, or TFMA, as supply was tight for prompt shipment months of March-May. Many traders were still exercising caution over taking new positions, while prices continue to soar.

However, after almost half a year of being out of the export market, TFMA on Feb. 23 booked a 63,000 mt feed wheat cargo from Australia, with no sprout guarantee, at $349/mt CFR for May 15-June 15.

These two deals within a week apart indicated close to $40/mt uptick in feed wheat prices in Southeast Asia since the conflict began in the Black Sea. Russian and Ukraine, combined, account for close to 30% of world’s wheat exports, according to the US Department of Agriculture.

TFMA has been out of the feed wheat export market since July 7, 2021, as the consortium was relying on other cheaper feed products such as local corn, tapioca, and broken rice amid tepid downstream demand, sources said.

“They thought they can rely on corn this year but situation has changed, other markets have bought all the corn around Thailand,” a broker based in Thailand said. “Very few Myanmar corn is left for Thailand, and local corn [prices] seem to be going up,” the broker added.

However, CFR Northeast Asian corn price index spiked by $46/mt since Feb. 23 to $399/mt CFR March 2, according to Platts assessments from S&P Global Commodity Insights.

Buyers spurred to book cargoes

The MY 2021-22 marked a drastic change in buying patterns among Asian buyers.

China has played a key role in this, as the country has been on a grain-buying spree to replenish grain stocks for food security reasons, along with an eye to fulfill its obligation to the World Trade Organization.

China imported 2.19 million mt of wheat from Australia in MY 2020-21, 59% higher year on year. In MY 2021-22, China has booked upto 5 million mt till May shipment, S&P Global Commodity Insights reported earlier citing trade sources.

This has pushed other Asian buyers to buy well ahead of the curve in fear of supply tightness and higher prices amid an already tight global balance sheet.

For instance, by February this year, South Korean flour millers have booked their Australian wheat purchases till July, as compared to end-March last year for the same shipment period.

“With the current situation removing a key region, he [buyers] may not be able to be as short term with his thinking and buying,” trading company Viterra’s grains trading manager, Simon Gellert, said during the conference.

“So I think it will drive a longer term shift towards consumers covering further out,” Gellert said.

Australia is expected to step up its position to fill the void of Black Sea supply but it was unclear whether prices will stabilize in the near term, market sources said.

Source: Platts

Related Posts


Finance & Economy
Shipping News

Keppel Corp posts 9% drop in full-year profit

Singapore’s Keppel Corp said on Thursday its net profit for the year fell 9%, partly hurt by weak performance from its urban development business...

Stolt-Nielsen sees Q4 profits rise on strong markets

Stolt-Nielsen Limited reported unaudited results for the fourth quarter and full year 2022. The Company reported a fourth-quarter net profit of $95.3 million, with revenue...

Euronav delivers better-than-expected Q4 revenue

Euronav NV reported its non-audited financial results for the fourth quarter ended 31 December 2022. Hugo De Stoop, CEO of Euronav said: “Constrained vessel supply...

Wartsila: A challenging year with strong annual growth

HIGHLIGHTS FROM OCTOBER–DECEMBER 2022 Order intake decreased by 24% to EUR 1,638 million (2,150)Service order intake increased by 6% to EUR 791 million (747)Net sales...

Hapag-Lloyd achieves extraordinarily strong result in its anniversary year 2022

On the basis of preliminary and unaudited figures, Hapag-Lloyd has concluded the 2022 financial year – in which it celebrated its 175th anniversary –...

Baltic index hits over 2-year trough on waning demand for larger vessels

The Baltic Exchange’s dry bulk sea freight index dropped to its lowest level in...

Luxury Cruise Market Holds Much Promise For Greek & East Med Hidden Gem Destinations

The appeal of Greece and the East Mediterranean as an ideal region for luxury...

Baltic index falls to over 2-year low as larger vessel rates slide

The Baltic Exchange’s dry bulk sea freight index fell to its lowest since June...

Baltic index logs worst month in 3 years

The Baltic Exchange’s main sea freight index registered its biggest monthly percentage fall in...

Baltic index snaps 9-day losing streak as panamax, supramax rates rise

The Baltic Exchange’s main sea freight index snapped its nine-session losing streak on Tuesday,...

DP World wins bid for development of a mega-container terminal at India’s Deendayal Port

DP World has won a major concession to develop, operate and maintain the mega-container terminal at Deendayal port in Gujarat, on the western coast...

Luxury Cruise Market Holds Much Promise For Greek & East Med Hidden Gem Destinations

The appeal of Greece and the East Mediterranean as an ideal region for luxury cruising will be one of the main highlights of the...

Port of Los Angeles proposes cruise terminal project

The Port of Los Angeles is inviting comments on a draft Request for Proposals (RFP) for the future development of a new Outer Harbor...

Port of Long Beach Closes 2022 with Second-Busiest Year

The Port of Long Beach marked its second-busiest year on record by moving 9.13 million twenty-foot equivalent units in 2022, allowing for a return...

Hapag-Lloyd AG acquires share in J M Baxi Ports & Logistics Limited

Hapag-Lloyd AG signed a binding agreement today under which it will acquire 35% of J M Baxi Ports & Logistics Limited (JMBPL) from a...