Global wheat buyers wrong-footed by sharp rally in prices

* Millers, traders caught short on wheat supplies

* Wheat price rally seen stoking food inflation

* Adverse weather to cut output in Russia, Europe

* Importers hold back from purchases as prices soar

SINGAPORE, May 30 (Reuters) - Wheat buyers in Asia, Africa and the Middle East, which account for two-thirds of global imports of the staple, have been caught out with relatively little supply after adverse weather in Russia and Europe unexpectedly sent prices surging 30% since April.

Importers who had been buying cargoes one or two months in advance, instead of the usual four to six months, on expectations that bumper supplies would persist will now have to buy grain at higher prices, which will be passed on to consumers, analysts and traders said.

Higher food prices would add to the bruised sentiments of consumers that are globally still adjusting to the period of higher inflation rates following the COVID-19 pandemic and Russia's invasion of Ukraine.

"Nobody saw this rally in wheat prices coming," said Ole Houe, director of advisory services at Australian agricultural brokerage IKON Commodities. "Millers and even traders haven't covered much from exporters. The supply pipeline is kind of empty if you look beyond June."

While frost has hit crops in No. 1 exporter Russia, dryness or excessive rains are threatening yields in the European Union, raising worries about lower supplies in the second half of 2024, a key period for global production and marketing.

The International Grains Council last week cut its forecast for 2024/25 wheat production by 3 million metric tons to 795 million tons.

"For a very long time, buyers have slowed down their purchases as they watched prices go lower. Now we have a rally in prices and there is growing concern," said Commonwealth Bank analyst Dennis Voznesenski. "Russia, which is the source for the cheapest wheat in the world, is facing production shortfalls and Russian prices are rising."

INFLATION PRESSURE

The rising cost of wheat is likely to result in higher prices of bread, noodles and pasta for consumers in importing countries.

"It will certainly increase the cost of producing flour for millers," Commonwealth Bank's Voznesenski said. "Higher wheat prices will ultimately translate into higher prices of bread at the retail level."

New-crop Black Sea wheat prices offered in Asia have jumped to around $300 per metric ton, including cost and freight, for July shipment, from around $250 a ton at the beginning of April.

In Egypt, the price of Russian wheat with a protein content of 12.5% is being offered at around 13,000 Egyptian pounds ($275.89) per ton, up from about 11,500 pounds a month ago.

Indonesia, among the world's top three wheat importers, has yet to buy significant volumes for new-crop Black Sea wheat for shipment from July onwards, two Singapore-based traders said, as buyers try to avoid the volatile market.

By this time last year, the country had booked at least half a dozen Panamax cargoes of around 60,000 tons each, they said.

The trend is similar in other importing countries in Asia, the Middle East and Africa.

"We are just holding 45 days of supplies," said a Dubai-based purchasing manager at a large Gulf mill. "It doesn't make sense to buy further out given the high cost of holding grains and market uncertainty," he said, referring to the higher interest rates that have increased storage costs.

Most importers are holding off purchases, hoping for prices to fall in the coming months as the harvest starts in Russia and other producing countries, Asian and Middle Eastern traders said.

"It's risky for the private sector to buy at these prices," said Hesham Soliman, a Cairo-based trader and president of Egyptian merchant Mediterranean Star, adding that prices are expected to be lower with the start of the new crop season in July unless there are political complications between Iran and Israel.

Even buyers in exporters such as Australia have cut their purchases, though they have locked in supply up to three months in advance.

"They are in a comfort zone as they are sitting in a net exporting country. But when they go and buy wheat, they will also have to pay higher prices," IKON Commodities' Houe said.

($1 = 47.1200 Egyptian pounds) (Reporting by Naveen Thukral; additional reporting by Sarah El Safty in Cairo; Editing by Christian Schmollinger)