February 11, 2008

 

Asia Grain Outlook on Monday: Wheat prices may continue to surge

 

 

Wheat prices are likely to continue surging this week, as record low global wheat inventories can't satisfy demand.

 

The sharpest gains in wheat futures were recorded for higher protein wheat grades, such as U.S. spring wheat.

 

In view of rapid gains in wheat futures, the Chicago Board of Trade Sunday revised its daily price limit to 60 cents, up from 30 cents.

 

After sharp gains on Friday, wheat resumed its upward climb in the early hours of Asian trading Monday.

 

In early morning trade, CBOT March wheat hit limit up, but shed some gains as of 0554 GMT to US$11.50/bushel, 57.2 cents higher from Friday's U.S. closing.

 

In an analyst report Monday, Commonwealth Bank of Australia said that the price limit revision on the Chicago Board of Trade and other U.S. exchanges could allow wheat prices to peak more quickly.

 

The wheat price rally is supported by a lack of supply in the first half of 2008, because major exporting nations aren't scheduled to harvest crops before July, when the U.S. wheat crop will enter the market.

 

Market participants are also looking at the progress of wheat crops in Asia's two major wheat consumers, India and China. In China, the negative impact of recent snowstorms on wheat crops will become clearer in coming weeks.

 

In India, the government has already revised the wheat crop estimate lower by 1 million tonnes to 74.89 million tonnes. India's wheat crop may eventually be in the 73-million-74-million-tonne range, a wheat analyst said.

 

While the Indian government isn't likely to import wheat over the next three to four months because domestic harvesting will begin later this month, there is a possibility that the country may import 2 million-3 million tonnes of wheat this year to boost domestic reserves.

 

Separately, several key Indian wheat growing provinces will likely experience dry weather over the next 10 days, which could be problematic for developing wheat crops in areas without irrigation, the Commonwealth Bank of Australia said.