June 19, 2009

Wheat prices in Asia may come under pressure in coming sessions, weighed down by weak supply fundamentals as the U.S. harvest season advances, and expectations of a bumper Australian harvest, traders said Friday.

 

Bellwether Chicago Board of Trade wheat futures ended lower Thursday, and though they staged a modest recovery in Asian trading Friday - at 0645 GMT, July wheat was trading on e-CBOT up 3.25 U.S. cents at US$5.6350 a bushel - traders said the upside potential appears limited, in the near term at least.

 

In Australia, production from a wheat crop to be harvested in late 2009 will likely reach 22.6 million metric tonnes, up 5.6% on year, according to a monthly agribusiness review issued Friday by National Australia Bank Ltd. (NAB.AU)

 

On Tuesday, the government's Australian Bureau of Agricultural and Resource Economics forecast a 5.1% rise on year in total output of winter crops this year to 34.8 million metric tonnes, of which 22.0 million tonnes was wheat.

 

Traders said reasonable rainfall throughout the Australian grain belt in the first half of June has helped lift production estimates.

 

Still, Asian importers continued to buy U.S. wheat this week. South Korea's Dongah Flour Mills Co. purchasing 22,900 tonnes from Cargill in a tender completed late Thursday, and Japan's Ministry of Agriculture, Forestry and Fisheries bought 127,000 tonnes of mostly U.S. wheat in a regular tender also finalized Thursday.

 

"We're covered for now but we will continue watching the market for good buying opportunities," said a trader with Dongah.

 

Despite a slightly softer near term outlook, with choppy trade expected as the market continues to take cues from external factors, the overall bullish tonnee in agricultural commodities remains intact, analysts said.

 

"While we continue to remain positive on grain price prospects through 2009 and expect further gains, near-term price movements are likely to be choppy reflecting perceptions about the health of the global economy and the influence of outside markets in the absence of decisive fundamental newsflow," Barclays Capital said in a daily commodities report late Thursday.

 

"The next influential data release will be the U.S. Department of Agriculture's annual acreage report at end-June where we anticipate a lower 2009 acreage number from March's Prospective Plantings number of 85 million acres owing to weather-induced delays," Barclays Capital said.

 

In other grains news, strong soy imports into China - which in the January-May period rose 27% on year - and tight U.S. supply will likely continue to help underpin global soy prices, analysts said.

 

China's imports in June and July are estimated to reach about 4.7 million tonnes and 3.6 million tonnes, respectively, compared with 3.6 million tonnes and 3.5 million tonnes last June and July, said Gao Yanrong, research manager for Dalu Futures.

 

"The pace of U.S. soy plantings continue to lag five-year averages...the U.S. Department of Agriculture's June WASDE report further highlighted the tight state of old crop soy, with 2008-09 U.S. stocks projected at 2.987 million tonnes, which would be the lowest level of stocks in 32 years," Barclays Capital said.

 

At 0645 GMT Friday, e-CBOT's July soy contract was up 8.75 U.S. cents at US$12.2250 a bushel.