Asian wheat demand seen steady

Asian wheat demand seen steady

PHUKET, Thailand (Reuters): Asian wheat consumption is unlikely to drop in the coming months despite higher world prices, a senior U.S. trade official said on Monday.

Rising prices -- thanks to declining world wheat stocks -- are unlikely to deter importers such as Japan and South Korea, although other Asian countries might reduce demand, said Alan Tracy, president of the U.S. Wheat Associates.

"We are going to have price rises, probably over the next six months to one year, that could be substantial. Asia is well- positioned for that.," Tracy told Reuters on the sidelines of the three-day South Asian Wheat Buyers Conference.

"There are certain markets like Japan and South Korea where the volumes won't be affected at all. But there are other markets where I think that prices are going to have an impact."

Earlier this month the U.S Agriculture Department cut its world wheat output estimate for 2001/02 to 569.35 million tonnes, down from last month's 572.35 million due to crop shortfalls in leading producing countries such as the United States and China.

Tracy said the U.S. trade was closely watching the weather in China amid a sharp downward revision in wheat crop estimates by USDA and other industry organisations.

"But in China, it is not the crop size that is the issue but the size of stocks. The shortfall they are going to have this year...they can cover it out of the existing stocks. They don't have a big import need in the near term," Tracy said.

According to China's State Cereals Information Centre, the country's winter wheat output in 2001 - which accounts for almost the entire output -- is expected to be 87 million tonnes, down 7.1 percent from last year.

But Tracy expected the world wheat market to change once China joined the World Trade Organisation.

"China do have substantial commitments to open up their market if they join the WTO -- that is likely to happen, say, near the end of this year. Then they could start to buy more wheat, which could help spark a price rally, he said.

Tracy was hopeful that U.S. wheat would raise its market share in Asia, currently at 30 percent of total U.S. exports.

"We expect that ratio to grow but it is difficult to predict just how this is going to work out over the next year or two -- with tightening supplies, increases in prices and some of the economic difficulties that are still here (in Asia)," he said.

He said U.S wheat sales growth in the coming months would largely depend on the size of the Australian and Canadian crops, which he added could possibly be lower than last year.

"Australia and Canada -- those two countries in particular don't keep much in the way of stocks," Tracy said.

He said the United States was striving to increase its share in Indonesia, Malaysia and Vietnam -- markets dominated by Australia -- but that was not proving to be easy.

"It has been slow for us in Vietnam. Australia has marketed its wheat very aggressively in Vietnam. We are working very hard on that market but we are yet to see very much by the way of results. But we are not giving up" he said.

Australia controls about 60 percent of the Indonesian wheat market, about 80 percent of Vietnam and nearly 70 percent of the Malaysian market. Th United States has a meagre 10 percent or less in those markets.

Tracy said U.S. sales to the Philippines, Japan and South Korea were steady, although Australian wheat was gaining ground in the noodles market in South Korea.

"We think in the future, U.S. will have some hard white wheats that will allow us to do a better job of competing for noodle wheat, not just in Korea but all of Asia," Tracy said.

Australia is a very stong competitor in the noodles market. Our soft white wheat is a little too soft for many kinds of noodles," he said.