December 7, 2010

 

Asian wheat prices forecasted to stay upbeat

 

 

Wheat prices in Asia are predicted to remain bullish this week amid worries about dwindling supplies, as unfavourable weather in the US and Australia continues to hit the market.

 

Extreme weather has plagued major food-producing and exporting countries over the last six months, and its impact on food security will likely dominate discussions during an international grains conference in Australia this week.

 

On the CBOT, March wheat futures settled 4.1% higher at US$7.79 a bushel Friday (Dec 3).

 

"Ongoing concerns (over the impact of poor weather on) the wheat harvest will continue to influence CBOT prices. Investors holding onto short positions would be buying them back, (and) prices may breach US$8/bushel," said Kaname Gokon, deputy general manager at Japanese commodity brokerage Okato Shoji Co.'s research division.

 

Singapore-based brokerage Phillip Futures, in a research note Monday (Dec 6), tipped March CBOT wheat to attempt to break US$8.50/bushel in this week.

 

"As the wheat market seems to be encountering weather problems globally, the traders start building in risk premiums into the prices," the brokerage said.

 

Traders will also be looking out for USDA's monthly supply-and-demand report due Friday (Dec 10) for price direction. The USDA is expected to revise down its estimate of Australia's wheat production in the crop year ending March 31 by 50% to one million tonnes, Phillip Futures added.

 

In the physical market, Asian wheat buyers have been scrambling to lock in wheat purchases at high prices, in order to secure stocks.

 

Taiwan Flour Mills' Association Friday (Dec 3) bought Dark Northern Spring 14%-protein grade from the US at US$549.43 a tonne, cost and freight.

 

"Physical buyers would be trying to lock in prices as soon as possible, as prices could go up even further next year," Okato Shoji's Gokon said.

 

Japan on Friday (Dec 3) issued a tender seeking 193,417 tonnes of food wheat from the US and Canada, stepping up the country's purchases to secure supply of the high-protein grain amid the unfavourable weather conditions.

 

Japan will tender for Australian wheat only after evaluating crop quality, a government official said Friday (Dec 3).

 

Amid concerns about grain quality in a rain-delayed harvest in eastern Australia, and with one analyst describing the immediate weather outlook as "sinister," GrainCorp Ltd. reported Monday (Dec 6) that there is strong global demand for wheat that does not meet normal milling specifications.

 

Trading executives awaiting a conference in Perth said that the Philippines has purchased at least five cargoes totalling 255,000 tonnes of Australian feed grade wheat at prices between US$291/tonne and US$295/tonne, cost and freight.

 

The purchases are significant as they point towards potentially more sales of Australian wheat as animal feed.

 

"This is just the beginning. Deals in Australian wheat for feed use will be an important feature of the global grains trade for the next few months," a Singapore-based grains trader said.