October 17, 2007

 

Asia Grain Outlook on Wednesday: Wheat prices may ease more; bulls seek news

 

 

Asian wheat importers will likely take comfort this week from news that U.S. wheat prices now appear to be on a downtrend after the December contract on the Chicago Board of Trade closed at its lowest in more than a month.

 

Tuesday, CBOT's December wheat contract finished 5 U.S. cents lower at US$8.28 1/2 per bushel - the contract's lowest closing price since Sept. 6 - with funds liquidating positions amid an increasingly bearish outlook.

 

JP Morgan's one-month outlook for CBOT wheat is now neutral to bearish.

 

Prices may hold above US$7.45/bushel in the near-term, but expectations of tight supply are now well-known within the market, JP Morgan said in a report late Tuesday.

 

Bullish demand news or a sub-12 million metric tonne Australian crop is needed to prevent a further price decline as attention is now turning to increased production by 2008, the report said.

 

According to a recent Morgan Stanley report, CBOT wheat prices are likely to average around US$8.00 per bushel in 2007/08.

 

Although two consecutive years of drought-induced production shortfalls have helped send wheat stocks to record lows and prices to record highs, the relative ease of wheat production, combined with the apparent hoarding of wheat supply may pull prices lower, should the weather cooperate, the Morgan Stanley report said.

 

But in Australia little relief is in sight for the drought-hit central and southern growing areas of New South Wales, which accounts for almost one-third of the country's wheat output, according to data from the government's Bureau of Meteorology.

 

Conditions have also been dry in Western Australia, which accounts for almost 40% of Australia's national output, although nearly all crops, including those in the northern and eastern areas of the western Australian wheatbelt, have now received at least some rain within the last 10 days, the bureau said.

 

The weather bureau's data appear to underscore previous forecasts that Australia's wheat crop will be around 12 million tonnes by the end of the year, which would be up from an actual 10 million tonnes in 2006, but much lower than the 25 million tonnes harvested in 2005.

 

In other news, Japan's Ministry of Agriculture, Forestry and Fisheries is seeking 85,000 metric tonnes of wheat in a tender to be concluded Thursday, an official at the ministry said Wednesday.