Black Sea wheat lures South Asia millers

New Delhi | Updated: Nov 29 2008, 06:38am hrs
Indian millers may buy wheat from Russia and Ukraine despite overflowing domestic granaries and hopes of a bumper harvest, as imports from the Black Sea region are cheaper, traders said.

Neighbouring Bangladesh and Sri Lanka have already bought some Black Sea origin wheat but volumes are forecast to surge.

Traders say the origin is more competitive than Australian supplies because of falling freight rates.

Lower freight has also turned the region's corn and soymeal purchasers -- Malaysia, Indonesia, Vietnam, Japan and South Korea -- to Brazil and Argentina, traders said.

India, which allows duty-free imports of wheat by users like flour and biscuit manufacturers, may slap an import tax if it sees large scale purchases.

Buying Black Sea wheat is an attractive proposition for Indian millers, Amit Takkar, assistant vice-president of Adani Enterprises Ltd, India's biggest exporter of farm goods, told Reuters.

The landed cost of wheat from Russia and Ukraine at around Rs 11,000 ($225.5) per tonne is lower than the rates offered by the state-run Food Corporation of India (FCI), he said. An Indian miller from the southern city of Bangalore said the local prices were 5-10% higher than imported grain.

Overflowing bins encouraged the government-run FCI to float local tenders to sell wheat to bulk buyers.

"Asia is a price-sensitive market. We all know that Australian wheat is of better quality than Russian or Ukrainian wheat but buyers like Bangladesh and Sri Lanka have opted for it as it cheaper," a Singapore-based trader said.

Takkar said the Back Sea origin wheat would cost about $185 per tonne against $220-$230 per tonne of Australian wheat.

The Black Sea wheat has just found its way into Asia. Bangladesh has bought a small quantity of about 15,000-20,000 tonne while imports by Sri Lanka have been even smaller. Going forward, purchases will go up, the trader from Singapore said.