Wheat Exports From Russia, Ukraine Are `Draining Out,' Flour Miller Says

Wheat shipments from Russia, the world’s third-largest exporter last year, and the rest of the former Soviet Union are slowing, prompting buyers in Indonesia to turn to the U.S. and Australia, an executive said.

“Wheat out of Ukraine and Russia has started to drain out,” said Franciscus Welirang, chairman of the Flour Mills Association in Indonesia, Asia’s biggest buyer. The country will increase imports of wheat used in flour to 4.3 million metric tons from 4.1 million tons last year, he said in a phone interview today.

Prices surged to a 22-month high on Aug. 2 after posting the biggest monthly gain since 1973 in July on concern that the worst drought in at least 50 years in Russia, persistent dry weather in Ukraine, Kazakhstan and other parts of Europe, and excessive rains in Canada may curb supply from some of the world’s biggest exporters.

The drought in Russia shows no signs of easing and now threatens sowing of the next grain crops, according to the Hydrometeorological Center. The Russian unit of Glencore International AG, the world’s biggest commodity trader, warned of a domestic grain shortage and said the government must impose export bans, allowing companies to cancel contracts.

Russia’s wheat harvest may plunge 19 percent to 50 million tons in the year that began July 1, the USDA’s Foreign Agricultural Service forecast on Aug. 2. Exports may drop 23 percent to 14 million tons this year, from an estimated 18.2 million tons a year earlier, it said.

Monitoring Prices

The U.S. agency’s export estimate compares with a forecast of 13 million tons this year by Glencore, and 9.5 million tons by the Moscow-based Institute for Agricultural Market Studies.

“We are monitoring” prices in Chicago and are concerned speculators may push them to the record levels of 2008, Welirang said from Jakarta today. Indonesia will keep buying wheat from overseas because of strong domestic demand, said Welirang, who is also a director at PT Indofood Sukses Makmur, the nation’s biggest flour miller.

He declined to give a price forecast, saying speculation will lead to “more people suffering.”

Wheat futures soared to a record $13.495 a bushel in February 2008 on concern that there would be a global food shortage, triggering riots from Haiti to Egypt.

The number of hungry people in the world has climbed to more than 1.02 billion, the highest level since record-keeping started in 1970, and “hunger has increased not as a result of poor harvests but because of high domestic food prices, lower incomes and increasing unemployment,” according to the United Nations’ Food and Agriculture Organization website.

U.S. Department of Agriculture data show Indonesia is Asia’s largest importer of wheat, flour and products.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

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