Indian import interest for Australian wheat fades amid higher price, new crop prospect

16.12.2016

India's import interest for Australian wheat for February and March deliveries diminished this week due to higher offers and uncertainties over the quantity and quality of new crop over March-April, despite the removal of an import tax December 8, traders said Thursday.

The Indian government removed its 10% wheat import tax for all-origin cargoes on December 8, in an attempt to control inflated domestic wheat prices, driven by inadequate local wheat in the open market.

The Indian market saw this move as an opportunity to boost wheat imports, given the dwindling volume of state-held buffer stocks and lower yield in the 2015-2016 season (Apr-May).

The US Department of Agriculture pegged Indian wheat production at 86.5 million mt for the 2015-2016 season, as opposed to Indian official estimates of about 94 million mt.

This resulted in a $4-$6/mt price hike late last week for Australian wheat.

Also, given that India requires the wheat be treated with methyl bromide for removal of insects and pests and that the process can only be carried out at certain ports in Australia -- including Adelaide in the south and Kembla in the east -- cargoes to India traded at a premium of $10-$17/mt over those to Indonesia for November-December loading, traders said.

Prior to the announcement, India's January imports of Australian Standard White were at $220-$225/mt CFR Tuticorin/Cochin while Australian Premium White was at $230-$235/mt CFR, according to data collected by S&P Global Platts.

After the announcement, offers went up to $226-$230/mt CFR for ASW and $238-$240/mt CFR for APW.

In the FOB market, APW was offered in the low $190s/mt FOB Newcastle on December 7 for February loading, but spiked to $197-$198/mt FOB Newcastle on December 14, because of a stronger Australian dollar and fewer sellers for February and March.

"The Indian market is not going to buy at the current higher level, they were only importing in September-November because of higher domestic prices, and higher import prices might not be attractive for them now given the macroeconomic situation," said a Singapore-based trader.

Also, some traders said colder-than-expected weather with heavier rainfall in parts of India could be beneficial for new crop.

As of December 9, the planted area for wheat totaled 22.56 million hectares, up 11.54% as compared to the same period last year, according to Ministry of Agriculture in India.

Wheat harvesting in India typically occurs late February-April.

In December, the USDA estimated India's new wheat for 2016-2017 at around 90 million mt, unchanged from its November estimate.

On December 14, Platts assessed APW at $200/mt FOB WA, unchanged amid rangebound buy-sell interests at $195-$204/mt.
 


platts

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