December 29, 2008
Australia's wheat futures advances on US lead
Gains last week in the US helped Australian wheat futures advance on Monday (Dec 29) with more rises possible, according to Michael Parry, a director of MarketSmart Commodity Management.
At 0515 GMT, ASX January wheat - Australia's most active wheat contract - was A$279 per tonne, up A$12 from Wednesday's (Dec 24) pre-Christmas holiday close and up A$17 from a week ago.
"The move came as a result of the rally over the last three sessions in the US," Parry said.
Domestic basis had been reasonably soft as a result of "sustained" selling pressure by growers since harvest ended in northern New South Wales and southern Queensland states earlier in December, but this selling has now eased, allowing prices to rise, he said.
ASX January posted a contract low of A$258/tonne December 12 after a sustained downdraft from almost A$400 in late August.
"We'll probably now flush out a few shorts in the trade who will need to buy to cover previously sold positions, forcing nearby ASX contracts higher," he said.
On Friday (Dec 26), light technical buying and spillover support from other markets pushed US wheat futures to fresh six- and seven-week highs, with CBOT March wheat ending 17 cents higher at US$5.99 a bushel, to be up 36 cents on week.
CBOT March wheat added a further 7.5 cents in electronic trading Monday to US$6.06/bushel, the equivalent for ASX January wheat of almost A$324/tonne, about A$45 above ASX January wheat basis.
In the absence of harvest pressure and a strong currency lead, ASX contracts should follow international trends, Parry said.
"Certainly at the moment, Chicago looks like it's got a little bit more upside in it," he said. "We're seeing strength developing in the short term. Be interesting to see how long it can go along without a whole swathe of sellers coming in again."