A competitively-priced bumper crop in Argentina and tight supply in its traditional origins has meant buyers in Southeast Asia are looking to Latin America for wheat well ahead of when they would typically be buying from the region, market sources have said.
Wet weather and frost threatened this year’s crop, although those fears appear to have been overstated with output estimates held at 19.2 million mt this week by the Buenos Aires Grain Exchange (BAGE).
A record-breaking 7.9 million mt of this year’s crop has been contracted forward, up from 5.6 million mt at this stage last year, with 7.3 million mt of that destined for export.
While the bad weather delayed the arrival of the first wheat in port, moves are now under way to kick off an ambitious export campaign that will see “close to half a million tonnes” leave Rosario by mid-December, up 40% from last year, according to the Rosario Board of Trade (BCR).
Destinations
A lot of those forward sales will be heading to traditional destinations in North and West Africa and other parts of Latin America, with loadings for Brazil, Peru and Mauritania already on the books.
That has been joined by Indonesia, which does not traditionally buy in big volumes from Argentina this early in the campaign.
Line up data showing 165,000 mt of the next two weeks’ loadings are heading there – about 20% of the total volume loading and three times as much as this time last year.
The bulk of Argentina’s sales to Southeast Asia typically come towards the tail end of its December-November marketing year, but a tight global balance sheet and a steep carry on the Black Sea has meant cargoes are already being offered into the region.
And it means Argentina is beating off other origins such as Australia, the EU and the Black Sea.
The EU and Australia are effectively out of the market for the foreseeable future after drought hit this year’s production.
Meanwhile, an ongoing phytosanitary dispute between Indonesia and Ukraine may have temporarily closed that route and there are lingering concerns that Russia may move to slow its exports.
And even if resolved, a steep carry and political uncertainty over exports from the Black Sea from January onwards only makes Argentinian wheat more tempting to buyers in Southeast Asia.
Competition
The Black Sea may not be an issue pricewise as its supply dwindles.
A December shipment panamax of 11.5% protein wheat was offered at $259/mt CFR Indonesia Friday – about the same price as a Ukrainian cargo for the same window.
The remaining threat to Argentina comes from the US, which has waited in the wings for its cue to make a comeback to the international stage for several weeks now, although it is still to make a decisive move.
And there is also Pakistan, which has around 500,000 mt to sell in December that can price competitively into the region due to proximity and government subsidy.
“Argentina can do over 1 million mt a month to North Africa and 200,000 mt to West Africa. There’s going to be about 600,000 mt that will need to head to Southeast Asia,” a broker told Agricensus, suggesting these sales are as much one of necessity as they are of competition.
agricensus