September 5, 2007

Asia Grain Outlook on Wednesday: Wheat outlook bullish on supply squeeze

Prices of imported wheat look set to rise this week, taking the lead from a strong rally in Chicago Board of Trade wheat futures on historically tight global supplies.

CBOT wheat futures ended Tuesday at an all-time high of $8.10 per bushel.

Strong fundamentals are driving the price spike as the U.S. is currently the only major wheat exporter in the world. Meanwhile, production prospects in major exporters such as Australia, Argentina, Canada and Russia are being revised downwards on worries of drought.

Prices are also being supported by importing countries aggressively securing supplies, according to a Morgan Stanley report issued Wednesday.

India exceeded expectations by purchasing 795,000 metric tons of wheat on Monday, and has plans to issue another tender for wheat imports. The country has only bought 1.306 million tons of wheat so far this year, compared to its plans to import 5 million tons.

Japan issued a tender for 175,000 tons of wheat Tuesday, up 150% from its previous tender for 70,000 tons two weeks ago.

Indonesia and Vietnam have raised their projected imports of soybean meal this year by 10% and 50% respectively, to reach 2.4 million tons and 1.5 million tons. This is due to higher feed demand, as meat consumption rises with higher disposable incomes and population growth.