October 8, 2007

 

Asia Grain Outlook on Monday: Wheat prices likely to continue decline

 

 

Asian buyers may get a break from rapidly rising wheat prices as the market has already factored in the likelihood of lower-than-expected output in Europe, the U.S. and Australia.

 

On Monday, Chicago Board of Trade wheat futures extended Friday's losses, on a lack of fresh bullish leads.

 

At about 0500 GMT, the benchmark December wheat contract on CBOT was down 10.4 U.S. cents from Friday's U.S. closing to US$8.79/bushel.

 

U.S. wheat futures are unlikely to reach US$10/bushel anytime soon, having peaked at US$9.59, with momentum indicators starting to turn and diverge against price, said Jonathan Barratt of Australia's Commodity Broking Services.

 

He added that "a short sharp selloff is imminent," with the price likely to fall to US$8.30/bushel.

 

However, analysts don't expect wheat prices to come off a lot, as fundamentals remain bullish. Global wheat stocks are at 30-year lows and demand remains robust.

 

Capping prices will be a lack of fresh leads.

 

"All the world's bad production news is over for now," Tim Hannagan of Alaron Commodities in the U.S. said.

 

Forecasts of rain Tuesday through Friday on Australia's parched eastern crop lands should go some way to temper increasing pessimism over the crop there despite a dry weekend.

 

Australia's most active wheat futures contract - ASX January 2008 - is currently trading AUS$15.50/metric tonne lower at AUS$459, with the possibility of more downside in coming days, said a Sydney-based commodities broker.

 

In import deals, over the past few days two major wheat tenders were reported in Asia. South Korea's Samyang Milmax Corporation bought 22,000 tonnes of U.S. No. 1 wheat in a tender, while Japan's Ministry of Agriculture bought 160,000 tonnes of wheat in a tender.

 

Neither of these buyers disclosed the price at which they bought the wheat.