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Asia eyes Argentine wheat as drought curbs Australian output

* Asian flour mills seen seeking wheat from Argentina

* Australia's 2nd year of drought to change trade flows

* Argentina's export tax on wheat may hamper exports

* Interactive supply & demand graphic: https://tmsnrt.rs/2p1rfNG

* Australia vs Argentina wheat chart: https://tmsnrt.rs/2p38lFX

By Naveen Thukral

SINGAPORE, Sept 13 (Reuters) - Asian flour millers are expected to seek rare wheat shipments from Argentina in coming months as a second year of drought in traditional supplier Australia curbs supplies.

At present, Asian wheat importers, including the world's biggest buyer Indonesia, are buying most of their wheat from the Black Sea region.

But Russia and Ukraine are expected to run out of surplus supplies by the end of the year due to a fall in output and strong demand for exports, forcing buyers are seek shipments from alternative origins, traders and analysts said.

"From December onwards and in the first quarter of 2019, we expect some of Argentina's surplus wheat to come to Asia," said one Singapore-based trader at an international trading company.

"We have lower wheat production in many exporting countries but Argentina is looking at a bigger crop."

Asia is the world's biggest consumer of wheat. Demand is expected to top 304 million tonnes during the 2018-19 crop year, a record 41.1 percent share of global consumption, according to U.S. Department of Agriculture (USDA) forecasts.

Asia is also the top importer, with shipments of the grain set to hit 57.5 million tonnes this year, up more than 50 percent since 2010-11 and the second-largest total on record, the USDA data showed.

However, several key wheat exporting countries have faced droughts in recent months, and traditional sources of supply may struggle to fulfil all of Asia's needs.

Production in Russia, the world's biggest wheat supplier, is expected to drop to 71 million tonnes in the year to June 2019 from all-time high crop of 84.99 million tonnes a year ago, according to USDA data.

Australia lowered its wheat forecast by nearly 13 percent to 19.1 million tonnes on Tuesday as a crippling drought across the country's east coast has cut output from the world's fourth-largest exporter to a 10-year low.

But wheat output in Argentina is expected to climb to 19.5 million tonnes from last year's 18 million tonnes, well above the 11.3 million tonnes produced in 2015/16, the USDA data shows.

"There were some concerns over dryness earlier but recent rains have been very good in Argentina," said one India-based agricultural commodities analyst at an international bank.

"Argentina's wheat crop could even exceed 20 million tonnes."

The country is expected to have a surplus of around 4 to 5 million tonnes after taking into account domestic demand and Brazilian imports, two trade sources said.

Benchmark Chicago Board of Trade wheat futures have gained by about a fifth this year in the face of tighter supply, after five consecutive years of record production and lower prices.

Still, Argentine farmers may delay wheat sales and plant less corn this year after the government announced a roughly 10 percent export tax on the grains as a part of an austerity program designed to halt a run on the peso currency, growers and consultants said.

Russian wheat was quoted around $250 a tonne, including cost and freight, into Asia this week, compared with $275 a tonne for cargoes from Argentina and $290 for Australian wheat.

(Reporting by Naveen Thukral; editing by Richard Pullin)

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