Attention shifts to new crop Australian wheat as old crop demand fades

Flour millers in South Korea have booked their first new crop wheat cargo from Australia, three months ahead of the start of harvest, attracted by the current price level, market sources said.

The buying group of flour mills in Pyeongtaek bought a combo cargo comprising 34,000 mt of Korean noodle blend KASW at $231/mt CFR and 6,000 mt of Australian hard wheat with 11.5% protein AH2 at $235/mt CFR Pyeongtaek for November shipment last Friday, traders said this week.

The price spread between old crop and new crop has narrowed to close to parity as demand for old crop has weakened from buyers in Asia who are focused instead on buying cheaper Black Sea new crop wheat.

Competition from the Black Sea in international markets, coupled with recent favorable weather in Western Australia, has been increasingly exerting downward pressure on Australian wheat prices.

S&P Global Platts assessed Australian Premium White wheat at $234.50/mt FOB Kwinana Wednesday, down $10/mt from May 30.

Two more combo vessels of 50,000 mt were also booked by a South Korean buying group in Incheon last week, market sources said.

The KASW was done at $233/mt CFR and AH2 at $245/mt CFR for last half September-first half October shipment, while the prices for each grade were $4/mt higher for October-November shipment.

Australia is expecting a 23% increase in wheat production to 21.2 million mt for 2019/20 harvest year relative to the previous season, according to the Australian Bureau of Agricultural and Resource Economics and Sciences.

While it was a dry start for the country's planting session, June rains across the wheat belt in Western Australia and parts of South Australia was healthy for the crop development.

"Everyone is predicting lower yield from last year and that would normally give more higher protein crop," said a trader based in Australia.

As a result, the spread between APW and high protein wheat is anticipated to be relatively narrower in the upcoming 2019/20 marketing year. Market sources are currently indicating the spread between APW and AH2 at $5-$10/mt for new crop wheat.

S&P Global