July 10, 2008
Australian wheat futures edge up ahead of USDA report
Australia's most active wheat futures contract - ASX January 2009 - dipped Thursday (July 10, 2008) then recovered, edging higher, in part as traders took positions ahead of a key USDA crop report late Friday, said Mark Martin, a director of commodity advisory and marketing business MarketAg Pty Ltd.
The price also reflects some concerns about Australian wheat production in 2008, which MarketAg estimates in a range of 18 million to 20 million tonnes, he said, compared with a forecast of 23.7 million tonnes issued in June by the government's Australian Bureau of Agricultural and Resource Economics.
Around 0610 GMT, the contract, which traded down to A$335/tonne, last changed hands at A$342/tonne, up AUS$4 from Wednesday's settlement.
Noting the contract has had "a pretty hefty selloff" from a high of A$375/ton June 27, in part reflecting the forecast and the impact of local rains, then bottomed at A$330/ton Tuesday, Martin said traders would be profit-taking and positioning ahead of the keenly watched USDA report.
With a report like that coming out over the weekend, a lot of traders would tend to square their books up in advance of it, he said.
The expectation is that the USDA report will show the world wheat crop getting bigger plus the US corn crop getting a little bigger, which could add to downward pressure on wheat futures - expectations that likely already are in the marketplace.
Martin also said ASX basis prices have improved relative to the Chicago Board of Trade basis.
"The security of our production still isn't all that great at this stage," with local market participants probably needing to sit tight through July and then reassess prospects, he said.
Martin believes some wheat districts in Western Australia are in urgent need of rain, while others in the east need to get topped up with moisture lest the crop sees some yield potential reduction.
Drought in Australia's Murray Darling Basin, the country's "food bowl" is getting worse, with Commission water inflows in June the lowest on record and levels for the autumn just slightly above the record lows of 2007.