December 10, 2010

CBOT wheat rises on speculation that Australia may abandon crops

CBOT wheat rose for the first time in three sessions on speculation that Australian farmers will opt against harvesting crops after rainfall hurt plants in eastern growing areas.

About 2-3 million tonnes of the grain may be abandoned, CBH Group said on Wednesday (Dec 8). The exporter is estimating wheat production at 23 million tonnes, with up to 11 million downgraded to feed quality instead of milling quality, said Tom Puddy, head of marketing for CBH's grain division. Exports also may decline.

"The harvest is in a very bad situation, and if rain continues, the volume could very much be reduced," said a US analyst. "Rising demand for US milling wheat is expected."

Wheat for March delivery rose US$0.0375 cents, or 0.5%, to US$7.8775 a bushel on CBOT. The grain touched a four-month high of US$8.11 on December 7.

The US, the world's largest wheat exporter, may lack the logistical capacity to meet rising global demand after rains cut the quality of harvests in Canada and Australia, the UN said.

As much as eight million tonnes of Australia's wheat harvest may be downgraded because of excessive rains, while Canada's output suffered from wet weather, pushing importers to seek alternative suppliers, said Abdolreza Abbassian, an analyst at the UN Food & Agriculture Organization (FAO).