By Naveen Thukral and Renee Hickman

SINGAPORE/CHICAGO (Reuters) – Wheat growers in several exporting countries are reluctant to sell their crops with prices near four-year lows, traders, farmers and millers say, leaving flour makers with dwindling supplies and vulnerable to any potential upswing in prices.

Typically grain processors buy wheat three to four months in advance. But millers in Asia, including Indonesia, the world’s No. 2 wheat importer, are currently covered for about two months, and in the Middle East, most grain processors only have up to 45 days of supplies, two millers and a trader said.

The limited supply held by flour makers reduces their buffer against any production shortfalls that would trigger a rally in world prices, with global reserves already projected to reach a nine-year low, and fuel food inflation.

Farmers are hoarding their crop as global wheat prices have slumped to their lowest since 2020 on solid output in Australia and Argentina and on improved growing conditions in major exporting regions including the U.S. and Black Sea region.

Wheat sales in Australia, the world’s fourth-biggest wheat exporter, are running at half the pace of last year at 500,000 tons contracted for November shipment.

At the same time, farmers in the U.S. and parts of the Black Sea region are storing grains gathered earlier this year in silos, hoping for higher prices, industry players said.

“Farmers are not happy with the current price being offered to them,” said a grains trader at an international trading firm in Singapore. “Farmer selling is very slow and it is not just Australia where the harvest is going on, it is the same situation in several exporting countries.”

FARMERS HOLD OUT

In the physical market, Black Sea wheat with 12.5% protein is being offered at $265 a metric ton, including cost and freight (C&F) to Asia, down from $275 a couple of weeks ago. New-crop Australian Premium White wheat is quoted near $280 a ton, C&F, down from $290.

“Prices have come off pretty dramatically. And personally, yeah, I am not selling any wheat at the current stage,” said Cordell Kress, a farmer from Rockland in the northwestern U.S. state of Idaho.

“If you are not needing money right away, it is kind of just, store it or hold on to it and hope for better prices or some other problem in Russia or Australia that will cause our prices to go up here domestically.”

Kress grows primarily soft white and hard red spring varieties of wheat.

In Australia, farmers are selling other crops instead. 

“You have very strong sales of chickpeas for cash flow, and now we are getting strong sales of canola into the current prices,” said Rod Baker at Australian Crop Forecasters in Perth.

TIGHT SUPPLY AHEAD

Along with lack of supply from farmers, high interest rates have deterred millers from stocking up on wheat, leaving them exposed if prices rise.

“Lower supply cover does leave us vulnerable, but with high interest rates it doesn’t make sense to hold large stocks,” said one Dubai-based purchase manager at a flour mill in the Middle East.

Even with robust southern hemisphere production, global wheat stockpiles are projected by the U.S. Department of Agriculture to shrink to a nine-year low by mid-next year.

“Wheat crops in the northern hemisphere still have to go through crucial development stages, any issues with the weather until harvest in July can trigger a rally in prices, given how tight the inventories are,” said Ole Houe, director of advisory services at IKON Commodities in Sydney.

In a slight reprieve for millers, attractive interest rates have prompted Russian farmers, who had been withholding their crops, to change tack and sell crops so they can deposit money in banks.

But top wheat exporter Russia might be running out of supplies. Moscow’s grain export quota, to be in place from February to June, could be nearly three times smaller than the 29 million tons a year earlier.

(Reporting by Naveen Thukral in Singapore and Renee Hickman in Chicago; Additional reporting by Peter Hobson in Canberra; Editing by Sonali Paul)

---