September 10, 2007

Asia Grain Outlook on Monday: Wheat prices look bullish on tight supply

The prices of imported wheat and corn to Asia could rise this week on huge purchases from importing countries and tight global supplies, said analysts Monday.

CBOT December wheat futures ended Friday at an all-time high of US$8.43 1/2 per bushel. Wheat futures also climbed to record highs last week on the Kansas and Minneapolis grain exchanges.

Strong fundamentals are driving the price spike as the U.S. is currently the only major wheat exporter in the world. Drought continues to threaten the two other major producers, Australia and Argentina.

Importing countries are making huge purchases on supply concerns.

India made the single-largest world wheat purchase of last week - at 29 million bushels.

The wheat rally has lent price support to other cash grains such as corn and soy, despite weaker fundamentals in these markets.

Buying from funds, prompted by a weaker U.S. dollar, is also adding to the price support.

China cut its 2007 soybean output forecast Monday to 14.4 million metric tonnes from 15 million tonnes earlier this year, leading analysts to predict higher domestic soymeal prices as the livestock industry recovers.