Wheat and Taiwan

Wheat prices are rising as major importers like Japan, China, and India move to secure supplies in the face of lowered production:

Aug. 23 (Bloomberg) -- Wheat prices in Chicago rose to a record, extending gains for a fifth day, as importers, including India, Taiwan and Japan, sought to buy the grain and adverse weather reduced supply in major exporting countries.

India, the world's biggest wheat consumer after China, plans to buy cargoes of 25,000 to 75,000 metric tons each for delivery from October to December, the New Delhi-based company said on the government Web site. The company will decide how much to import by Sept. 3.

Unfavorable weather has damaged crops in major producers including Australia, Europe, Russia and Ukraine. Global inventories of the commodity used to make bread, pastries and biscuits are expected to fall to the lowest in 26 years by May 31, according to the U.S. Department of Agriculture.

In Taiwan, the price of flour has risen steeply, driving many mom and pop places out of business. According to a local paper's report, more than 400 bakeries have vanished in Taichung alone. With wheat supplies pinched, the local Taiwan milling association, which represents the islands 34 mills, was forced to re-issue a tender for 92,000 tons late in August after the initial tender failed to find any takers. With both Japan and India increasing imports -- India because its reserves are low -- grain is reaching record prices. Another factor driving this is rising transportation costs due to high oil prices, a factor that is hitting Taiwan hard. Taiwan halted shipments of 9,000 tons of wheat from the US in July due to the discovery of pesticide residues in the wheat, which prompted speculation that suppliers might punish the island, though nothing like that seems to have happened.

Taiwan imports between 75% and 85% of its wheat from the US. It imports just over a million tons of wheat annually, though its mills have capacity for about 40% more than that. From the US Taiwan imports mostly hard red winter wheat for baking, but it has been increasing its sourcing of hard white spring wheat for noodles in recent years as US producers attempt to move into this increasingly valuable Asian market. According to one local business representative:

Ron Lu, U.S. Wheat Associates’ country director in Taiwan says, “Australia significantly started selling hard white wheat to Taiwan in 2005, after Taiwan millers failed to purchase hard white wheat from the United States.”He continues, “There was a 130% growth of Australian prime hard (APH) wheat imports to Taiwan from 4,670 MT in 2004 to 110,530 MT in 2005.

“Taiwan millers have learned the value of hard white wheat for making noodle flour. Hard white wheat has higher flour extraction and white color for making noodles.” Taiwanese millers have traditionally purchased high protein (14%) APH from Australia.“Taiwanese millers like the kind of hard white wheat produced in the hard red spring (HRS) states including Noth Dakota, South Dakota, Minnesota, and Montana.”

World wheat production is expected to decline, and global supply will be tight, driving prices up, probably for the next few years.......what that means for an island that doesn't produce any wheat itself is obvious.

[Taiwan]