Surging freight rates are pushing Asian wheat buyers towards cargoes from Australia, which is aggressively pricing its offers and exploiting a shipping cost advantage over US supplies.
With global grain markets fluctuating sharply, Asian grain traders said they were hesitant to get into huge long positions.
And as they restrict their purchases mainly to spot deals, they are finding Australia-origin cargoes a better option since the sailing period is relatively shorter and the landed cost works out $5 to $10 cheaper than cargoes from the United States.
US hard red winter wheat works out to around $225 a tonne C&F. And some recent sales of Australian wheat were to Egypt, which bought 120,000 tonnes of standard white wheat at $152.70 a tonne FOB and 60,000 tonnes of hard wheat at $162.80.
The sailing time from Australia to Southeast Asia is around 10 to 14 days, while it takes 20 to 23 days for shipments from the US Pacific Northwest and 27 to 30 days from the US Gulf.
"High prices and high freight rates all around therefore, buyers are looking at Australia," said one Singapore trader. "For nearby deals, Australia is certainly a better option.
The Chicago market is very volatile now." The cost of shipping grain in a Panamax-sized cargo from the US Gulf to Southeast Asia is about $60 a tonne, compared with less than $40 a year. Freight from Australia is at least $10 a tonne lower.
The focus on Australian wheat has increased all the more since AWB Ltd this week raised the country's production forecast to a record 25 million tonne from estimate of 22 million to 24 million tonnes.
The wheat crop last year in Australia, world's second-largest exporter of the grain, after the United States, was slashed to 9.7 million tonnes by drought.
"This has given a chance to Australia to price their offers more competitively," said another trader. "They are having a lot to offer and there are no dearth of buyers here. Only those buyers who are keen on forward shipments are going to the United States.
One Malaysian flour miller said the Southeast Asian nation had bought a spot cargo of about 10,000 tonnes of Australian wheat and was looking for some late February shipments, too.
"Two to three deals could be finalised soon. All shipments are going to be from Australia," the Malaysian trader added.
On Wednesday, Chicago Board of Trade wheat futures closed one to four cents per bushel higher on spill-over support from the bullish numbers for wheat on Tuesday's USDA supply/demand reports and on hopes for additional sales of US wheat to China. March was up 4 cents at $3.88-1/2.
"China is probably the only market in which Australia is finding difficult to sell as much as they want," said one trader.
"It's certainly smooth sailing in other markets." AWB Managing Director Andrew Lindberg told Reuters this week that AWB was well placed to pick up more sales after its one million tonne Chinese deal announced in December.
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