Asian wheat demand seen to boost world prices

Asian wheat demand seen to boost world prices

SINGAPORE (Reuters): Asian wheat demand will rise substantially this year as the region recovers from financial crisis and should help spur world prices higher in 2000/2001, the top U.S. wheat industry representative in Asia said on Friday.

The United States is expecting to boost its Asian wheat sales this year, often at the expense of its main competitor in the region, Australia, Mark Samson, vice-president for South Asia of U.S. Wheat Associates, said in an interview with Reuters.

Demand will also grow in the region as buyers shift more to wheat-based products because of relatively higher rice prices in the past four years, he said.

"In addition to that, increases in employment, rising consumer spending and increased liquidity following economic recovery will also help Asian wheat demand to rise," Samson said.

Samson, who just returned from a visit to Indonesia, predicted U.S. wheat would take a greater share of that market even though its economic recovery is sputtering.

"I would say we would like to capture in time about 20 to 25 percent of the Indonesian market, with the country imports expected at about 3.0-3.2 million tonnes. Last year, our share was 12 percent.

"We would also like to increase our market share in Vietnam. It is just about two percent now. We would like to maintain our market share in the Philippines, which is growing. Right now, it is about 78 percent," he said.

Malaysia and Thailand also offer good sales potential, Samson said.

Wheat demand in South and Southeast Asia is expected to rise to about 15 million tonnes from 14 million last year, he said.

"Out of the 15 million tonnes, given our distance from the market, I would hope we (the United States) can maintain an overall market share of 33 to 40 percent in Asia," he said.

Competition for Asian sales seems likely to intensify, judging by Samson's comments.

"The wheat trade situation can be very competitive this year," he said. "This can put pressure on both exporting and importing countries."

A larger than expected harvest in the United States could pressure prices in the next few months, Samson said. Over the last month, U.S. wheat prices have hovered just above decade lows.

But Samson said recovering Asian demand and an anticipated reduction in wheat stocks held by exporting nations should help international prices recover in 2000/2001.

World wheat demand in 2000/2001 was expected to outstrip supply for the third consecutive year, forcing a cut in global stocks to 108 million tonnes from 134 million last year.

Samson said world wheat production in 2000/2001 was expected to be about 582 million tonnes while consumption was expected to be nearly 595 million tonnes.

"We are going to see a reduction in the stocks held by the exporting countries and that will cause the prices to go up. I believe you will see a strengthening of prices by the end of the year," Samson said.