June 4, 2008

Asia Grain Outlook on Wednesday: Wheat prices may fall, but demand strong

Wheat prices are likely to fall in the remaining part of this week as the U.S. wheat harvest gathers pace, but the fall is likely to be limited due to a sustained strong demand.

While Saudi Arabia may import wheat in the near term, Pakistan is also looking at substantial wheat imports in the short term.

Pakistan's wheat-growing Punjab province has received federal approval to import 2.5 million metric tonnes of wheat over an unspecified timeframe.

This will be in addition to the 2.5 million tonnes the federal government has announced it will import last month.

Though these imports will be spread over many months, the import of 5 million tonnes is a good support for any grain market.

In other wheat deals, Japan's Ministry of Agriculture has sought 178,000 tonnes in a tender to be concluded Thursday. The tender is seeking U.S., Australian and Canadian wheat.

In other news, the progress of monsoon rains in India has been stalled for 48 hours, though the India Meteorological Department's Web site has said conditions are favorable for the monsoon's progress in the next two days.

Good monsoon rains in June-September are critical to ensure the adequate supply of rice and oilseeds in India, especially for rice. India has banned the export of white rice and a bumper rice harvest could mean the resumption of exports, which will have a major bearish impact on global rice prices.

In other commodities, the outlook for soybeans remains bullish as Argentine farmers have extended their strike, which is likely to hamper soybean exports from the world's third largest exporter.