February 9, 2006

 

Australia's AWB says many factors pushing up wheat price

 

 

A host of factors both in the United States and elsewhere are helping push global wheat futures to record levels, according to Michael Vaughan, New South Wales state manager for Australian wheat exporter AWB Ltd.

 

The key factor is a large inflow of money into futures in the US, with corn and wheat apparently representing good value according to funds, he said.

 

Vaughan was commenting in his weekly column published Thursday in The Land weekly newspaper that was prepared several days ago, before US wheat futures ended higher Wednesday, helped by light fund buying.

 

Wheat futures on the Kansas City Board of Trade jumped Wednesday, with March setting a new contract high for the fifth consecutive session, surging 13.5 US cents to settle at US$4.26, according to market participants.

 

An Iraqi tender for hard wheat, results of which still haven't been announced, "has got Kansas going," in turn sending Chicago higher, Vaughan said.

 

Also helping wheat rally is an emerging tight supply situation in global corn, he said.

 

Moreover, weather concerns also are impacting wheat, notably drought worries for the southern plains of the US, with much more rain needed to prevent significant declines in yield potential, he said.

 

"The wheat market appears o be pricing in a sharp drop in US supply in particular," he said.

 

Winter kill of 10-15 percent of planted crops in Ukraine from severe winter weather in recent weeks has resulted in a downgrading of wheat production estimates to 12.5 million tonnes from 19.0 million tonnes previously, he said.

 

Finally, technical factors and bullish-looking charts are also helping the wheat price rise, particularly a chart that shows prices are well above a downtrend line in place since March, he said.

 

AWB operates a monopoly over wheat exports in Australia, usually making it one of the top three global supplier nations.