June 16, 2008

 

Australian wheat futures jump after us rally

Australia's most active wheat futures contract - ASX January 2009 - jumped Monday (June 16, 2008) in what was seen by one market participant as a response to Friday's rise in US wheat futures and ongoing concerns about a drought.

 

The contract rose AUS$23 to settle at AUS$374 a tonne. Other wheat contracts that traded also gained ground.

 

Technical buying and a rally in CBOT corn futures catapulted US wheat futures sharply higher Friday. CBOT July wheat soared 31 cents to US$8.82 per bushel Friday, up 71 cents on the week, then added another 8 cents in Asian trading to be quoted at US$8.90/bushel at 0730 GMT.

 

Chris Heinjus, manager of grain marketing services at upcountry South Australia-based consultancy Rural Directions, said a premium is being built into the ASX January 2009 contract on the possibility of a drought.

 

The jump in the contract "would be a reflection of dry weather concerns and forecasts for dry weather up the east coast," he said.

 

"The current weather's supporting an 18 million to 20 million tonne wheat crop with a huge reliance on spring rainfall," he said of the prospects for this year's crop, while noting that he is not as bullish as a production forecast by a major bank.

 

Earlier Monday, National Australia Bank Ltd. forecast production from a crop to be harvested late in 2008 at 24.3 million tonnes, down 3.2 percent from an estimate a month ago, but still almost double the actual drought-reduced output of 13.1 million tonnes last year.

 

"Although current forecasts for the 2008 crop have been dampened by poor May rainfall, wheat production of between 24 (million) and 26 million tonnes...remains a realistic possibility," said the bank's report.

 

The government's Australian Bureau of Agricultural and Resource Economics is scheduled to update its production and planting estimates for new winter crops Tuesday at 0000 GMT.

 

(US$1=AUS$1.006)