July 14, 2008

Australian wheat futures face downward pressure

Australia's most active wheat futures contract - ASX January 2009 - likely faces downward pressure in coming weeks, as concerns over a tight global output ease, Paul McKay, a director at risk management adviser Commodity Broking Service, said Monday (July 14, 2008).

The contract could fall even as anxiety about local production persists.

ASX would face a collapse, he said.

Recent concerns about US corn production, which has been a major factor driving wheat prices, has moderated, weighing on corn prices and pushing global wheat prices lower, he said.

ASX January 2009 wheat plumbed AUS$307 per tonne in early June and this could be a key support level on the way down, a breach of which would open the AUS$280 level, he said.

Around 0700 GMT, this contract was untraded in a A$325-A$338 a tonne spread, compared with Friday's settlement of AUS$339/tonne.

Concerns about the Australian crop will peak in coming months, McKay said adding that September's weather patterns could determine the crop. 

There is a lot of anxiety after drought in the past two years slashed production to 13 million tons last year, he said.

However, the USDA appears to have no such concerns about the Australian crop in its crop report issued late Friday, which increased an estimate for Australian wheat production by 1.0 million tonnes to 25 million tonnes from a month ago.