Asian wheat price may rise but temporary

The outlook for Asian wheat prices in the remainder of the week is positive due to adverse weather in North American growing regions, but gains may be temporary, trading executives said Wednesday (June 23).

 

"The wheat market is getting support from the recent rains in Canada and the upper Midwest in the US," a Singapore-based commodities analyst said.

 

Prices will likely hold steady or even rise in the next few days, but this may not be sustained, he said.

 

The September wheat futures contract at the CBOT closed 1 1/2 cents lower Tuesday (June 22) at US$4.75 3/4 a bushel.

 

Most traders said prices may rise to US$4.80/bushel but then decline toward US$4.50 by next month.

 

"The weather may be bad in North America, but there are ample stocks from the previous crop, and harvests are good in Russia, CIS countries and Europe," said a Tokyo-based executive at a global trading company.

 

Hard red winter wheat is available from the US at US$200/tonne, free-on-board from the west coast, Western white wheat around US$190/tonne and dark northern spring wheat around US$260/tonne, he said.

 

Once the US spring wheat hits the market, by October, prices could decline by US$10-20/tonne, he added.

 

 

There are indications that some level of speculative covering has been driving the recent rally in wheat prices, Scott Briggs, agricultural commodities strategist with ANZ Banking Group said in a research report.

 

This rally cannot be justified, Briggs said, noting that there is no indication that wheat crops in the northern hemisphere are going to fall sharply due to recent adverse weather.

 

Traders said there are concerns about lower protein content in the ongoing winter wheat harvest. High-protein US wheat is fetching a premium of 70 cents/bushel over lower-protein grain.

 

However, there is potential for the protein spread to widen without support from the wheat complex as a whole, Briggs said.

 

The upcoming glut of lower-protein wheat out of the European Union, Black Sea and the US may still push prices down, but with higher-protein wheat being impacted to a lesser extent, thereby widening the spread, he noted.