KIEV: Indian buyers have bought up to half a million mt worth of Ukrainian wheat in the last month and a half, bringing total imports this year to about 1 million mt in spite of the 25% import duty in place, traders said. Faced with prospects of a poor harvest, the country had already purchased over 500,000 mt of Australian wheat between March and June 2016, but the competitiveness of Ukrainian wheat now means buyers’ focus is firmly on the Black Sea.
Indian flour millers have been lobbying for a removal of India’s 25% import duty on wheat, which officially remains in place until September 30. But this duty has failed to block imports. “Even with the duty in place, Ukrainian prices make sense,” one Singapore-based trader said Tuesday.
Highlighting the attractiveness of Black Sea prices, Ukrainian 11.5% protein wheat is tradable at around $160/mt FOB, while Australian Premium White (APW), which has about 12% (dry basis) protein, is currently priced at $200/mt FOB for December shipments, according to S&P Global Platts data. But demand for Australian wheat into India will remain, the trader added. “There will be niche demand for Aussie wheat, primarily into South India, which requires a different quality of wheat for its semolina-based products.”
Black Sea wheat had initially not been expected to be accepted into India, which has strict requirements around the levels of the fungus ergot in imported wheat. Australia is known to be ergot free, while Black Sea and European wheat has higher levels.
But India now appears to be allowing cargoes defined as “free from ergot” under the European definition, which allows up to 0.05%, the trader explained. Another requirement is for the wheat to be fumigated with methyl bromide, something which Ukrainian ports are not equipped to do, forcing those cargoes to be fumigated offshore before discharging in India.
Domestic Indian wheat prices have been inflated by tight supply, amid rapidly falling local inventories, traders said. From a crop last year of 86.53 million mt, official government estimates put the 2016-2017 wheat harvest at around 94 million mt, while the US Department of Agriculture last week estimated a 90 million mt crop. Some traders feel it could even be below 85 million mt.
