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.