Singapore — Australian premium white wheat surged to $283/mt FOB Kwinana on Thursday, up $5.50 day on the day and the highest since Platts started assessing it in November 2015.
Strong domestic buying appetite coupled with tight supply of old crop has led to soaring prices both in the domestic and export market, with APW up a massive $33.50/mt or 12% month-on-month, Platts data showed.
A severe drought in parts of the wheat producing region in eastern Australia, where the majority of domestic demand is concentrated, has led to buyers scrambling to secure cargoes.
On Thursday, bids for Australian Standard White wheat were heard at $282/mt FOB WA for October shipment, with offers in the range of $287.50-289/mt.
Despite the rising bid levels, farmers remain reluctant to forward sell in view of relatively lower wheat production figures for the 2018/19 marketing year.
The latest report by the US Department of Agriculture kept Australian wheat production unchanged at 22 million mt, while the most recent survey conducted by INTL FCStone showed the estimates averaged at 18.77 million mt, down 1.5 million mt on the month.
Forecasts of below-average rainfall in the south and parts of Queensland for the period of September to November were also adding to the price rally.
"September and October likely to be drier than average for most of northern, eastern and southern Australia," Bureau of Meteorology said in its latest climate outlook released Thursday.
Sellers in Western Australia were offering the cheapest APW wheat in the past 2-3 months on better crop prospects given good rainfall compared with the rest of the wheat belt.
Traders expect the interstate movement of grain from the west to the east to increase in the upcoming marketing year due to the high premium in deficit areas.
"It's going to be a difficult year to market Australian wheat, especially to South East Asian buyers who are chasing the cheapest origins," said a trader based in Singapore.
Buying appetite from South East Asian buyers remain thin as Australian wheat remains significantly uncompetitive relative to other origins.
"Whoever is buying Australian wheat right now would be doing so hand-to-mouth and in small quantities with the purpose of minimizing their consumption of Australian wheat as much as possible," said a source from a major flour mill.
The spread between Platts APW and Black Sea 12.5% wheat was $49.50/mt on Wednesday, widening 50% since the year-to-date low of $24.50/mt on April 24.
