ASIA WHEAT ROUNDUP: Australian prices ease in June, Asian appetite strengthens

Australian wheat prices declined in June, tracking US and European wheat futures and following improved harvest in the Northern Hemisphere.

Platts, part of S&P Global Commodity Insights, assessed with the Australian Premium White grade weakening to $278/mt on June 28, from $295/mt on June 3, and Australian Standard White falling to $267/mt, from $287/mt during the period, even as most wheat growers had sold their old crop.

Improved rainfall over most of Western Australia through June raised hopes of production rebounding, trade sources said. Weather on the East Coast has been largely ideal, and both the major producing states are seen poised for a good season provided weather remains favorable throughout spring.

Rainfall across cropping regions in South Australia and western Victoria was patchy, though higher precipitation in the latter half of June was helpful in reducing yield penalties on the wheat crop, according to the Australian Bureau of Meteorology and industry participants.

The Australian Bureau of Agricultural and Resource Economics, or ABARES, in its June 4 report raised its wheat output forecast for the country by 12% on the season to 29.1 million mt for 2024-25 (October-September), due to higher planted acreage and improved rainfall. In contrast, trade estimates were mostly in the 25 million-26 million mt range, with several of the estimates closer to 28 million mt.

Improving weather and sentiment regarding new crop production has encouraged some domestic new-crop sales in Western Australia, though trade sources said that volumes in the market were small.

Asian demand picks up

Market participants reported stronger buying activity throughout June, as US and Black Sea wheat prices fell following weaker futures.

Feed wheat demand picked up primarily in the second half of June, with Thailand, the Philippines and South Korea all tendering for third-quarter shipments, according to trade sources.

Feed wheat trades into Asia

Source: S&P Global Commodity Insights trade data

*LO refers to inclusion of liner cost

Milling wheat demand also strengthened in June, with South Korean buyers entering the market for North American milling wheat, capitalizing on declines in Chicago Board of Trade and Minneapolis Grain Exchange wheat futures.

Southeast Asian buyers, particularly in Vietnam and Indonesia, were actively seeking Black Sea and US wheat indications, though several trade sources said that the bids were too low compared with offers, restricting trade volumes. Most Southeast Asian millers were covering August to September shipments, with a handful of them still seeking shipments as prompt as July.

Firm demand for Australian milling wheat was restricted to Japan's regular tender as well as some Middle Eastern countries, as Australian wheat was outpriced by other origins.

China has been absent from the market for wheat imports, with the latest customs data from the country showing 8 million mt of inflows between January and May, representing 83% of its tariff-rate quota. Trade sources have observed a lack of fresh buying interest from China since early April that they attributed to an improved domestic wheat harvest and slower economic recovery due to a sluggish real estate sector.

However, demand from China has emerged recently for containerized new-crop Australian wheat, though interest in bulk cargoes was thin.

Meanwhile, India's food ministry imposed stockholding limits on wheat at 3,000 mt for wholesalers June 24 to lower domestic prices and ensure ample wheat supplies in the market. The limits will be in place until March 31, 2025.

There has been market chatter about India possibly allowing significant volumes of wheat imports at reduced or zero tariffs, following the conclusion of elections early June. However, domestic market participants have said that the government is unlikely to approve imports given large import volumes of other essential food commodities this year.

Asia wheat outlook

• As weather continues to improve across Australia's winter crop regions, all eyes are on rainfall and temperatures that could preserve and hopefully boost crop yields across the country, trade sources said.
• Improved harvest in the US and Europe could keep a lid on prices going forward, however, a lot depended on Russia's 2024 wheat crop. Market participants expect to gain a better understanding of the extent of frost damage sustained by the Russian wheat crop in the earlier part of 2024. However, production estimates for the country from traders have mostly risen above 80 million mt because of more favorable weather.
• Container availability could be an issue, as trade sources reported container diversions to China for goods sales to the US ahead of US elections later in the year, with some empty containers heading directly from Australia for China.