February 6, 2008

Asia Grains Outlook on Wednesday: Wheat may continue gains on CBOT trend

Wheat prices in Asia are likely to rise sharply for the rest of this week, on bullishness in Chicago Board of Trade wheat futures.

Tuesday, CBOT wheat futures were sharply higher, with March wheat closing limit up, 30 cents higher, at US$10.03 per bushel.

Analysts said that supplies of spring wheat are historically low and getting tighter, but commercial demand remains steady. It is difficult to ration demand because high-protein spring wheat is used for food.

On Tuesday, Japan announced it was seeking 172,000 metric tonnes of wheat, including 81,000 tonnes of U.S. dark northern spring wheat and 45,000 tonnes of U.S. semi-hard wheat, which helped support prices on CBOT.

In Wednesday's morning trade, CBOT March and May wheat contracts hit limit up, but at present are trading off highs.

At 0525 GMT, CBOT March wheat was trading up 27.6 cents higher at US$10.30/bushel. May wheat is trading 22.6 cents higher at US$10.42/bushel.

On a longer-term basis, a recent report by Barclays Capital said that wheat prices may moderate this year after scorching gains in 2007 as farmers around the world may plant more crop. Also hurting wheat prices is likely to be the fact it isn't a feedstock for biofuels production, unlike soybeans and corn, it said.

While a gradual downward move in wheat prices seems likely in 2008, wheat will continue to remain vulnerable to weather concerns for major growing regions or supply disruptions of any other type, as global stocks remain low, it said.