Asian flour millers may probably have to increase its wheat shipments from Argentina, which is rare in the past, in the next few months as a second year of drought in traditional major supplier Australia raises concerns about expected supplies.
Currently, Asian countries, including the world’s biggest wheat buyer Indonesia, have most of their wheat imports from the Black Sea region.
Russia and Ukraine, however, are expected to exhaust surplus supplies by the year end as a result of decreased production and strong demand for exports, forcing buyers to source wheat shipments from alternative exporters, industry analysts said.
“From December onwards and in the first quarter of 2019, we expect some of Argentina’s surplus wheat to come to Asia,” said one Singapore-based trader engaged in international grain trading.
“We have lower wheat production in many exporting countries but Argentina is looking at a bigger crop.”
Asia accounts for the most of the world’s wheat consumption with demand in the region expected to reach 304 million tonnes in the 2018-19 crop year, exceeding 40 percent of global consumption, according to forecasts by the U.S. Department of Agriculture (USDA).
Also as the top importer, Asia’s shipments of the grain is set to hit 57.5 million tonnes this year, jumping over 50 percent compared with 2010-11 and the second largest on record, the USDA data showed.
However, some major wheat exporting countries have suffered from droughts in recent months, so that traditional sources of supply may not fully meet Asia’s demand.
Australia has recently cut its wheat forecast by nearly 13 percent to 19.1 million tonnes as severe droughts across the country’s east coast has cut its output to a 10-year low, Reuters reported.
Russia, the world’s biggest wheat supplier, is expected to see a drop in production to 71 million tonnes in the 2018-2019 crop year, as compared to an all-time record output of 84.99 million tonnes a year earlier.
But Argentina is expected to harvest bumper crop of wheat, with the production rising to 19.5 million tonnes from 18 million tonnes last year, according to the USDA data.
“There were some concerns over dryness earlier but recent rains have been very good in Argentina,” said one India-based food commodities analyst at an international bank. “Argentina’s wheat crop could even exceed 20 million tonnes.”
It is expected that Argentina will have a supply surplus of around four to five million tonnes after meeting domestic demand and considering exports to Brazil, trade sources said.