July 21, 2008

 

Australia's wheat futures slips after arrival of rains
 
 

Australia's most-traded wheat futures contract - ASX January 2009 - slipped Monday after some helpful weekend rainfall in New South Wales state, where the contract is deliverable, bolstered the crop outlook, James Whatley of commodity risk management adviser Ag Concepts Unlimited said.

 

The contract fell as it was also a little overpriced compared to CBOT December wheat, he said.

 

"I don't think you'll find too many buyers out there given the current crop situation, with a couple of sellers looking to capitalize on the prices as they are at the moment," Whatley said.

 

Around 0600 GMT, ASX January 2009 last traded at AUS$318/tonne, down AUS$6 from Friday's settlement.

 

Whatley said he would not be surprised if the contract fell further, though some technical charts suggest the current price level could enjoy "fairly strong support," with an early June low of AUS$307 providing the next level of support.

 

Rainfall through July means the Australian wheat crop "is looking pretty good at this stage," he said, citing a higher production forecast to 25 million tonnes by the USDA.

 

Meanwhile, in a research note on ABB Grain Ltd. (ABB.AU), UBS said volatility in the company's share price is understandable given the still fresh memories of last year's drought-savaged crop, but the severity of the price decline is premature.


"The next month is critical but given current rainfall patterns ABB's catchment is still on track for an average harvest...not more nor less," it said.

 

From March 1 to July 15, western Victoria and South Australia, the region in which ABB Grain operates a storage and export terminal network, has received between 70 percent and 90 percent of the estimated long-term mean rainfall, ABB said, quoting the government's Bureau of Meteorology.

 

Continued intermittent rain over the next six to eight weeks is needed to meet expectations, UBS said.

 

In the eastern states, most of the weekend rain fell on the western slopes of the Great Dividing Range, tapering off to the west.

 

Parched wheat farms in the southern coastal region received some rain in Western Australia.
   

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