Australian wheat protein premiums surge, harvest volume seen at 5-year high


Premiums for higher protein Australian wheat have risen dramatically in recent weeks as a clearer picture emerges of this season's crop, with the volume seen at a five-year high but the proportion classified as high protein shrinking markedly, traders said Friday.

Australia Hard wheat No. 2 or AH2 with minimum 11.5% protein was trading at a premium of $25-$30/mt to Australian Premium White or APW with minimum 10.5% protein this week -- more than double the premium seen two months ago.

Some sellers were even avoiding quoting hard wheat prices due to farmer reluctance to sell amid concerns they may be unable to deliver the grade.

"Of the 1.2 million mt wheat delivered to date in Western Australia, only 40,000 mt or 3.6% has made it to hard wheat [11.5% protein or above] grade," said one trader in Australia.

Last year, AH comprised more than 20% of the wheat pool, traders said.

Growing concerns over the potential for tight AH and AH2 wheat supply, as well as quality concerns due to frost damage in Western Australia, have prompted a number of Asian millers to secure forward cargoes, with some millers heard to have already booked shipments as far ahead as May.

More than 260,000 mt of AH2 has been sold since July for January-May 2017 loading, with South Korean and Indonesian millers booking several April-May shipments in the past two weeks, S&P Global Platts data showed.

The rise in forward bookings comes amid a rise in premiums over the past two to three months.

Asian millers have bought AH2 at $225-$238/mt FOB WA in recent weeks, up sharply from $210/mt FOB WA in August, Platts data showed.

Around 42.5% or 516,419 mt of the wheat delivered in Western Australia to date this season has been categorized as lower protein Australia Standard White or ASW, based on the latest harvest update released by CBH, the state's largest grain bulk handler.

Last year, ASW accounted for less than 20% of the pool, traders said.

The average protein level of the state's ASW this season is 8.3-8.7%, down from 9.5-10% last season, a trader in Australia said.

With ASW comprising almost half the pool this season, the discount ASW with minimum 8.5% protein attracts to APW was heard at $10-$12/mt this week, widening from $7-$8/mt a few weeks ago.

"ASW would arguably need to be priced as feed wheat given the size and profile of the crop," said a Singapore-based trader.

More than 150,000 mt of January-February loading ASW has been sold to China to date; 8.5% protein cargoes at below $200/mt CFR South China and minimum 9% protein cargoes at around $206/mt CFR, Platts data showed.

Platts last assessed APW at $199.50/mt FOB WA Thursday, with buy-sell indications at $196-$202/mt.

Australia is expected to produce more than 28 million mt of wheat in 2016, the largest yield in five years, according to latest estimates by the US Department of Agriculture.


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