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Southeast Asia returns to Black Sea for new crop wheat

Singapore — End-users in Southeast Asia have started purchasing new crop wheat from the Black Sea, three to four months ahead of the harvest, attracted by the recent slump in wheat prices.

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Russian 12.5% protein wheat was down 10% to $224/mt FOB Black Sea Friday from its 2019 peak of $247.50/mt on February 6. The prices had been falling gradually since the beginning of February, encouraging buying interest.

On March 5, a buyer in Thailand booked two 60,000 mt feed wheat cargoes at $211.50/mt and $210.50/mt CFR liner-out Bangkok for July and September shipment, respectively. The origin is likely to be from the Black Sea, sources said.

Buyers in Indonesia have also started purchasing milling wheat from the Black Sea with a deal reported done end-February for a 60,000-mt cargo for 11.5% protein at below $230/mt CFR for August shipment.

Since then, global wheat prices have tumbled further, enticing several buyers in the region to book cargoes of new crop. So far, three to four vessels of the Black Sea new crop were heard booked by flour millers in Indonesia.

Late last week, another buyer in Indonesia was heard to have booked a 60,000-mt vessel at around $215/mt CFR for new crop. This is in line with a deal reported done for Ukrainian 11.5% wheat at $186/mt FOB for the same volume, with freight at approximately $30/mt.

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"I wouldn't say full-fledged demand for Black Sea new crop has kicked in just yet. The recent deals are more of opportunistic buying by major players given the steep inverse between old and new crop," said a trader in Singapore.

The current price inverse between Black Sea old versus new crop is in the range of $25-30/mt.

Activity in the CME Black Sea Wheat Financially Settled (Platts) futures for new crop has been firm as a result. The highest open interest stays with July trading month, which amounted to 5,270 lots of 50 mt each, or 263,000 mt, as of March 8, followed by March trading month with 3,050 lots or 152,500 mt. On Thursday, 700 July futures exchanged hands, which represent August-loading physical prices traded, adding to 550 lots Wednesday and 850 lots Tuesday.

Indonesia has become a major buyer of the Black Sea wheat in recent years, with imports from Ukraine and Russia up by 14% year on year to 3.65 million mt in 2018, data from Central Bureau of Statistics, Indonesia shows.

-- Takmila Shahid, takmila.shahid@spglobal.com

-- James Colquhoun, james.colquhoun@spglobal.com

-- Alexandre Bobylov, alexandre.bobylov@spglobal.com

-- Edited by Ikhhlaq Singh Aujla, newsdesk@spglobal.com