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UPDATE 1-Asia faces tight noodle wheat supply, Australian farmers hold back stocks
April 28, 2017 / 6:40 AM / 3 months ago

UPDATE 1-Asia faces tight noodle wheat supply, Australian farmers hold back stocks

3 Min Read

* Supply of Australian wheat to make noodles tightens

* Farmers hold back stocks with prices at decade lows

* Wheat mills may seek U.S. cargoes if delays prolonged (Adds pictures advisory to slug, removes graphics advisory)

By Naveen Thukral

SINGAPORE, April 28 (Reuters) - Asian flour millers are facing tight supplies of a variety of Australian wheat which is used for making mainly noodles as farmers hold back stocks amid near decade-low prices.

Buyers are having difficulty in getting shipments of Australian Standard White (ASW) wheat for the coming months, which could force millers to seek alternative supplies, traders and millers said.

Asia is the world's biggest and fastest growing wheat market, fuelled by rising consumption of noodles, flat breads and bakery products. China and India each consume roughly 100 million tonnes a year and Indonesia has emerged as the world's second largest wheat importer behind Egypt, buying more than 10 million tonnes in the year to June 2016, up 35 percent on a year earlier.

"Farmers are not willing to sell as they feel prices are really low," said one Singapore-based trader. "There is no shortage of ASW, there was bumper production."

ASW wheat was being sold at a 10-year low level of about $190 a tonne, free on board, in January and February. The market has since recovered to trade around $200 a tonne but prices are still below the $220-$240 a tonne average of recent years, traders said.

The world is awash with wheat, with the U.S. Department of Agriculture forecasting global inventories at a record 252.26 million tonnes at the end of the crop year in June.

Australia produced a record 35.13 million tonnes of wheat in the 2016/17 season - about 18 percent more than the previous record of 29.6 million tonnes set in 2011/12.

"I think it is just a temporary problem of farmers not selling," said a procurement manager at one Southeast Asia-based flour miller. "There is additional demand as well, India has been buying Australian wheat."

India has bought close to 5 million tonnes of wheat since June, the most in a decade, to meet a supply shortfall after two years of lower production.

Even for Australian farmers who want to sell, big volumes of wheat and other grains being sent by truck and rail across the country after a bumper season are creating backlogs.

"There is an issue of getting grains to the ports from farms," said Ole Houe, analyst with brokerage IKON Commodities in Sydney. "There's not much problem at the ports themselves."

Asian mills prefer using ASW for noodles, where texture and mouth-feel can be affected by factors like protein content.

Wheat importers also have the option to blend grains from other origins, traders said.

"They can replace ASW with other origins and also blend varieties of wheat from the Black Sea region," said Singapore trader. "But most millers will wait even if there is some temporary delay. They prefer Australian wheat."

Reporting by Naveen Thukral; Editing by Richard Pullin

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