Black Sea wheat exporters are boosting sales to Asia from the crop harvested last July in a surprise move, denting demand for US shipments which were expected to pick up in the second quarter of this year. The benchmark Chicago Board of Trade wheat contract has fallen more than 10 percent so far this year, losing more than half of the gains made in 2018 on expectations of strong demand for US supplies.
"It is a comeback for Black Sea wheat to Asia after a brief slowdown," said one trader at an international trading company in Singapore. "Prices being offered for Russian and Ukrainian wheat are among the cheapest now." Wheat millers had been expecting top exporters from the Black Sea region, Russia and Ukraine, to run out of surplus grains early this year after a hectic export programme, leaving room for Argentina and the United States to fill the gap.
Argentinian wheat exports picked up early this year in Asia following drought in Australia, but Black Sea wheat is now returning, squeezing out shipments from the United States, the sources said. Asia is the world's biggest wheat consumer and importer.
Prices for old-crop Russian wheat with 11.5 percent protein have dropped to around $250, including cost and freight (C&F), to Indonesia, the world's second largest importer, from $270 a tonne quoted in January and early February. Buyers in the region are looking for May-June delivery.
Russia still has a surplus of 4 million to 5 million tonnes of old-crop wheat for exports, a leading trader for Black Sea wheat told Reuters at the end of February. Last week, the US Department of Agriculture raised its estimate for inventories in the United States.
US wheat ending stocks were pegged at about 28.72 million tonnes, up from the February outlook of 27.50 million tonnes and above the high end of market expectations. Wheat exports were cut to 26.26 million tonnes from 27.22 million tonnes. Asian buyers have also been locking in deals for the new Black Sea crop that will be harvested in July.
In recent deals, millers in Indonesia bought up to 200,000 tonnes at around $215, C&F, for arrival in August, traders said. "There are good flour margins to be made which is encouraging mills to sign deals as far ahead as August," said a second Singapore based trader.
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