CHICAGO, Illinois (Reuters) – Traders say that U.S. wheat is priced to sell despite rallies fueled by index-fund buying of futures, but importers are holding out until this year’s harvest fills up supply channels and weighs on values.
The hard red winter wheat harvest has resumed after rain delays, but was still in the early stages, while the soft red winter wheat harvest is two weeks away.
“Buyers are biding their time until new crop supplies start filling the pipeline,” said grain analyst Shawn McCambridge of Prudential Securities.
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Traders said demand was also blunted by ample stocks in the hands of some buyers because of good domestic crops, poor demand for flour and the prospect of bumper crops in Europe, where there is still large quantities held over from last year.
“A lot of people (exporters) have old crop production and some buyers have their own decent crop,” an exporter said, adding that key buyer China is expected to have a “reasonably good crop” this year, which is likely to dim its import potential.
The exception in the production game could be Australia, where a drought in its eastern region is expected to whittle down wheat production this year.
But the country’s monopoly wheat exporter AWB Ltd. continued to be aggressive with sales, selling 120,000 tonnes of soft white wheat to Egypt, beating out offers from the United States in that class of wheat.
Despite the loss, U.S. traders said U.S. wheat was competitively priced in the tender, set by state-run General Authority for Supply Commodities of Egypt, one of the world’s largest importers of wheat.
They said U.S. soft white wheat was offered at $143.54 cents US a tonne on a free-on-board basis, excluding shipping costs, compared with Australia’s winning offer of $142.30.
“I was surprised that Australia wanted to sell its wheat that cheap,” an exporter said, adding that GASC likely wanted U.S. prices to dip even lower by choosing Australian wheat.
The best U.S. offer for soft red winter wheat was $135.14 per tonne f.o.b., compared with French soft wheat priced at the tender at $134 per tonne f.o.b., traders said.
French wheat’s competitive edge has been sharpened by the European Union’s export subsidies on wheat from the region, which was $9.80 per tonne for 151,000 tonnes last week.
U.S. hard red winter wheat was offered at $148.15 at the GASC tender. Australian standard hard white wheat was offered at $151 while Russian wheat was priced at $130 per tonne.
