* Buyers in talks for 500,000 T of Australian wheat
* Looking for new-crop January-March shipment wheat
* Chinese buying interest to underpin Australian prices
* China seen buying 2-3 mln T of 13/14 Australian wheat (Adds details of expected purchases, trader’s quotes)
By Naveen Thukral and Colin Packham
SINGAPORE/SYDNEY, July 17 (Reuters) - Chinese importers are negotiating deals to buy at least half a million tonnes of Australian wheat for January-March shipment as the world’s top consumer scrambles to fill a shortfall in domestic supplies following extensive crop damage.
China’s wheat crop has suffered more severely than previously thought from frost in the growing period and rain during the harvest, and import demand to compensate for the damage could see the country eclipse Egypt as the world’s top buyer.
Wheat imports by China, which accounts for a fifth of the world’s production and consumption, is expected to underpin global prices as adverse weather has left as much as 20 million tonnes, or 16 percent of the nation’s crop, unfit for human consumption.
“There is ongoing interest for about 500,000 tonnes of Australian standard wheat and Australian prime wheat,” said an Australia-based trader.
A Singapore-based trader said Chinese buyers were bidding for 500,000 tonnes of Australian wheat but they could end up buying higher quantities for supplies in the first half of 2014.
China has already locked in about 300,000 tonnes of new-crop Australian wheat in contracts signed at the end of June and early this month.
Overseas traders and analysts estimate China’s wheat imports in 2013/14 could rise above 10 million tonnes, surpassing the 9 million tonnes that Egypt is expected to buy.
Traders said China are expected to take between 2 million and 3 million tonnes of Australian wheat in the year to June 2014, substantially higher than the 500,000 tonnes to 1 million tonnes it typically buys, forcing traditional importers to seek alternative supplies.
“Looks like Chinese demand will completely disrupt supplies to the Middle East and others like Indonesia will be forced to pay higher prices,” said one wheat trader in Perth.
Iran, Iraq, Saudi Arabia and Yemen are key buyers of Australian wheat in the Middle East with some shipments going to private millers in Egypt as well. Indonesia is the one of the top buyers of Australian wheat in Asia followed by Japan and South Korea.
China has already booked around 3 million tonnes of wheat, mainly from the United States, Australia and France, for shipment in the year to June 2014, nearing last year’s purchases.
The U.S. Department of Agriculture on Thursday raised its forecast for China’s imports in 2013/14 to 8.5 million tonnes from 3.2 million tonnes in the previous year, prompting U.S. wheat prices to rally to more than two-week highs.
Australian cash prices have firmed up following Chinese buying interest, traders said.
Australian prime wheat is quoted around $320 a tonne, free on board, for January and Australian standard wheat is being offered around $310 a tonne, with both varieties up $15 to $20 a tonne from a few weeks ago.
Chinese farmers visited by Reuters in the top producing province of Henan said kernels shrunk because of the frost early this year followed by more damage with grains germinating due to the rainstorms in May. Henan is in the northern grain belt, which accounts for about half of China’s output. (Editing by Ed Davies and Muralikumar Anantharaman)