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American Trade Hits As 3m Tonnes of Cheaper Local Grain Floods Asia
HONEY, we've shrunk the market for US wheat. And Uncle Sam is decidedly upset. The traditional strongholds of US wheat — Indonesia, Malaysia, Philippines, South Korea, Sri Lanka, Vietnam, and the Middle East — have been flooded by 3m tonnes of substantially cheaper Indian wheat over the last 18 months. And their appetite for Indian wheat continues to grow.
Taken by surprise, Washington now believes if Indian exports meet even half the target of 10m tonnes of subsidised wheat in '02-03, it will be a direct blow to US' chances. According to latest data collected by the US agriculture department, in Bangladesh, US exports are only half that of the previous year because Indian wheat has been imported at significant discounts to that of competing suppliers and captured 40% of the market.
In the Philippines, Indian wheat has directly reduced short red winter sales as well as hurt sales of soft white from the Pacific Northwest.
In South Korea, Indian wheat is competing with US corn for use in animal feed. Indonesia, Sri Lanka and Malaysia have already together imported 680,000 tonnes of Indian wheat from July to May. Even Vietnam, though not a major destination for US wheat, has become a large market for India, importing 300,000 tonnes this year. "This suggests that Indian wheat will likely be the main beneficiary of this rapidly expanding market," USDA has said.
In the Middle East, millers are blending high quality wheat with low quality Indian wheat to produce flour of acceptable quality more cheaply.
"Sourcing cheap wheat is particularly important to Middle Eastern importers given the weakness in their currencies. As a result, Indian exports to UAE, Egypt and some smaller importing countries have provided additional competition to US exports," the US government said. The new '02-03 marketing year (April-March) will be equally challenging for US wheat even though Washington believes New Delhi tends "to be a bit optimistic and it is highly unlikely that the 10-m-t target will be met."
"Several factors point to increased Indian exports this year including very large subsidies, continued strong demand from customers of Indian wheat, exporters purchasing directly from the market rather than the food agency, and a much better quality crop," it has pointed out.
This year's wheat crop is particularly
favourable for export as its protein levels are far higher than previous
years. "This, combined with recently installed cleaners at Indian ports,
should allow more quality conscious buyers to purchase the wheat as evidenced
by a recent Malaysian purchase of 100,000 tonnes and an agreement with
Sri Lanka for the purchase of 300,000 tonnes over one year," the US government
has slated. 'Though export levels will largely depend on the government's
subsidy policy, the above factors, when combined, point to an increase
in Indian exports from 3m tonnes this year to 4m tonnes, further limiting
export opportunities for US wheat," it has concluded.
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