Asian millers caught out by rally in wheat prices

SINGAPORE (Reuters) — Some Asian flour millers have been caught out by last month’s nearly 30 percent rally in global wheat prices after earlier booking cargoes with prices due to be fixed at a later date, traders said.

Benchmark Chicago Board of Trade wheat futures jumped 23 percent in June and high-protein spring wheat climbed 34 percent, driven up as severe drought reduced production in some key U.S. and Canadian growing regions.

“Some millers had booked cargoes for August-September shipment, but had not set prices,” said a Singapore trader.

“They will have to pay higher prices (now).”

However, would-be grain buyers have been shying away from the market because they think some price gains are unsustainable.

“We expect prices of spring wheat to remain high. Buyers will have to pay the premium,” said another Singapore-based grains trader.

“But as far as CBOT is concerned, I think it is overdone. I will be ready to short this market next week.”

On the physical front, Canadian Western Red Spring (CWRS) wheat was quoted around $350 a tonne, including cost and freight, in Asia this week, up from around $260 a tonne about a month ago.

U.S. Dark Northern Spring (DNS) wheat with 13.5 percent protein is being offered at $370 a tonne, cost and freight, up from $280 a tonne sold in early June.

The rally in U.S. wheat futures has lifted prices of Australian wheat.

Australian Premium White (APW) wheat is being quoted at $273 a tonne, cost and freight, compared with $243 a tonne early last month. Australian Standard White (ASW) wheat was at $263, up from $233 a tonne.

Drought conditions in the northern U.S. Plains worsened at the end of June and there are forecasts for more hot and dry weather that could crimp the harvest.

As the world struggles with a glut of grain that has filled inventories to record levels, the shortage of high-quality spring wheat has taken markets by surprise.

High-protein wheat is blended with other varieties of the grain to make bread flour.

“We are concerned about high wheat prices, but there is no panic yet as most mills have some supplies,” said one procurement manager at a large milling company in Asia.

“Buyers will start importing once the market settles down.”

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