Asia Grain Outlook on Wednesday: Wheat prices to fall more on ample supply

Wheat prices have lagged far behind the gains of some other agricultural commodities this year, and are likely to slide further as larger harvests in importing countries reduce the market for U.S. wheat exports.

"Higher supply by some major producers and a lack of import demand (from major consumers) will weigh on prices further," said Hiroyuki Kikukawa, head of research at IDO Securities in Tokyo.

He pegged psychological support for Chicago Board of Trade wheat futures at US$5.00 per bushel. The CBOT March contract finished Tuesday down 8 1/4 cents at US$5.39 3/4 per bushel, declining for a sixth consecutive day to its lowest level in more than a month.

"The (U.S.) export weakness comes in the face of an extremely weak U.S. dollar...It reflects the sharp decline in world wheat trade occurring in 2009-10, which in turn reflects much larger crops in importing countries," said Darrel Good, an agricultural economist at University of Illinois.

The U.S. Department of Agriculture has projected exports of all classes of wheat for the current marketing year to May 31 at 875 million bushels, the lowest since 2002-03 and the second-lowest since 1971-72.

The weak supply-demand fundamentals didn't support the price rally in November, which was largely due to buying by funds on cues from technical charts, analysts said. Wheat futures gained 18% in November, but have fallen nearly 9% this month.

Meanwhile, the major producers in Asia, China and India, are each expected to harvest an additional 2 million metric tonnes this year.

India's junior agriculture and food minister K.V. Thomas said Wednesday the government is considering a reduction in the price of wheat offered to bulk consumers from federal stockpiles to better reflect market conditions.