Cheap Black Sea wheat is undercutting exports from Pakistan and is likely to keep the south Asian country out of the market for several months, traders said on Monday. Asia’s third-largest wheat producer, Pakistan resumed wheat exports in January for the first time in three years and sold nearly 1.8 million tonnes of wheat by June, before being knocked out of the wheat market by fierce competition by Russia.
“After the Russian entry, there has been a drastic downward change in prices and despite having ample stocks, we don’t think we can sell any wheat in the current scenario,” Johar Ali Qandahari, a leading trader, told Reuters. “To my information, the last shipment was early this month. We cannot sell wheat at the prevailing rates.”
Pakistan was aiming to export nearly 3 million tonnes of wheat by mid-July. Most of its wheat sold went to East Africa, Middle East and Bangladesh. Traders said Pakistan sold shipments in January at up to $350 per tonne fob (freight on board), and they made their last deals around $304-305 per tonne fob. Javed Thara, a wheat exporter, also ruled out any further export of Pakistani wheat, saying the existing rates were far below even their cost price. Traders say export below $300 is untenable. Pakistan doesn’t have the storage capacity for its excess stocks, so domestic prices will likely by driven downward as Pakistan dumps its unexported wheat on the home market. The return of Russia to export markets, after a ban last summer due to drought, has put downward pressure on prices.
Egypt, the world’s largest wheat importer, bought 180,000 tonnes of Russian wheat for August 1-10 shipment on a free on board basis last week, including 60,000 tonnes from Cargill at $244.50 per tonne, with freight costs at $18.25. Russia may export around 8 million tonnes of grain in July-September, although its exportable surplus is expected to be significantly higher, the head of Russia’s main grain industry lobby said last month.
Pakistan’s 2010/11 season wheat crop output is likely to cross 24 million tonnes while there is 3.2 million tonnes of carryover from the previous crop, according to the food ministry. The country’s domestic consumption is around 22 million tonnes. Traders, who estimate higher carryover stocks, say the country has exportable surplus of more than 4 million tonnes.
