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Wheat shipments to Asia from Argentina to increase

18 February 20202 min reading

Argentine wheat shipments to Asia are poised to climb to a record high over the next two months as a drought curbs Australian production and Black Sea inventories tighten, Reuters reported.

Indonesia, Asia's biggest importer, along with Vietnam, Thailand and the Philippines are expected to receive close to 1.2 million tonnes of wheat from the South American country, two traders told Reuters. "This year's volumes of wheat coming to Asia from Argentina are substantially higher than in 2019, which itself was a record year for Argentinean supplies," said one trader who is based in Singapore and supplies wheat to flour millers across the region.

Argentina is one of the world’s leading agricultural commodities producing countries. The country has a solid comparative advantage in agriculture due to its exceptionally fertile lands, especially for cereal and livestock production. It is a top ten wheat exporter and world’s No. 3 soy and corn exporter. FAO foresees that overall production growth in Argentina will lead to higher exports of agricultural commodities. USDA estimates Argentine wheat production for 19/20 season at 19 million tons. Wheat exports for the season forecast at 13.0 million tons.

"More than half of 1.2 million tonnes (for February and March) is heading to just Indonesia," the trader said. Indonesia is scheduled to receive close to 700,000 tonnes, while vessels carrying around 300,000 tonnes are expected to arrive at Vietnamese ports over the next two months.

Thailand has nearly 150,000 tonnes of Argentine wheat on the way, and the Philippines is getting close to 60,000 tonnes. For all of 2019, Indonesia bought 1.7 million tonnes of wheat from Argentina, according to Refinitiv Eikon data, while Vietnam imported 182,000 tonnes and Thailand 396,000 tonnes.

Argentina became a key wheat exporter to Asia in early 2019 as a third year of drought curbed wheat exports from traditional supplier Australia and grain reserves tightened in the Black Sea region after a hectic pace of exports. This year, Russia's agriculture ministry is looking to set a non-tariff quota for grain exports of 20 million tonnes in January-June, adding the quota would be scrapped later in the most active part of season for trading. Australia last month cut its wheat production forecast by nearly 20% for the year through June 2020, as an unrelenting drought across the country's east coast will likely see output fall to an 11-year low.

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