IKAR in Mass and Industry Media

Commercials caught short by rally in grain and oilseed prices

Reuters

SINGAPORE, Aug 16 (Reuters) - International trading companies that sold wheat and other crops to millers across Asia on expectations of bumper global supplies have been caught short after output dropped in Russia and lifted global prices, three Singapore-based traders told Reuters.

Russia, the top global wheat exporter, has been hit by dry conditions that are expected to reduce this year’s crop by at least 5.9 million tonnes from previous estimates to 76.4 million tonnes, according to leading consultancy Sovecon.

That has pushed up Russian wheat export prices by 15% in the past month and sparked steep crop price rallies from other leading exporters, such as the United States.

“One of the trading companies signed a deal to supply 50,000 tonnes of Black Sea wheat to a buyer in Indonesia at $280 a tonne, including cost and freight (C&F), for August shipment a few months ago, but now the cost of the same shipment is $330 a tonne C&F,” one Singapore-based trader said.

The most active wheat contract on the Chicago Board of Trade has added almost 12% in past three weeks. Wheat’s strength has also served to lift corn prices by nearly 6% over the same period.

BUYER PANIC

For some middlemen, crop importers, and food processors, the recent price surge is a double whammy on the cost side after a jump in freight prices this year.

Asia is by far the largest importer of agricultural goods, with Indonesia the second-biggest wheat buyer while China is the top soybean and corn importer.

Trading companies that are short of supplies are now rushing to cover shipments, fueling further price gains.

“We have heard of people trying to cover supplies, resulting in another round of gains in the physical market,” another Singapore trader said.

On Wednesday two leading agriculture consultancies in Moscow – IKAR and Sovecon – cut their estimates for Russia’s 2021 wheat crop, citing hot, dry weather.

The U.S. government has also cut its outlook for domestic corn production by 2.7% and its soybean harvest forecast by 1.5%, hit by dry soil in key Western growing areas.

The dry conditions also hampered U.S. wheat production, which was forecast at a 19-year low of 1.697 billion bushels, 2.8% below the government’s July forecast.

23.08.21

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