August 23, 2010

 

Wheat prices in Asia may have peaked

 

 

Asian wheat prices may have already reached a near-term peak, and could move sideways this week, as demand for feed grades from Central Europe increases.

 

Australian Prime Wheat is currently being offered around US$300-US$305/tonne, free-on-board, with Australian Standard White around US$297/tonne, up from US$290-US$295/tonne, a week ago.

 

"Many traders are reluctant to make offers because of the uncertainty over the prices," said a Singapore-based executive at a global trading company.

 

Recent rainfall in Russia, which is favourable for winter plantings, and concerns that the country may have to import grains, including wheat, from neighbouring countries early next year has heightened the sense of lack of clarity.

 

Traders said until Russia's wheat harvest is complete, by early-September, the market may act in knee-jerk response to any news that crops-up - but will not hit fresh highs or return to much-lower June levels.

 

Wheat futures for September delivery at the Chicago Board of Trade settled 25 1/4 cents, or 3.8%, higher Thursday (Aug 19) at US$6.81 1/4 a bushel after reaching US$7 for the first time since Monday (Aug 16).

 

Prices eased Friday (Aug 20) during Asian electronic trade to hit an intraday low of US$6.72.

 

Most traders expect prices to move between US$6.50 and US$7.00 a bushel until mid-September, but Nobuyuki Chino, president of Tokyo-based Unipac Grain, put the range at US$5.80-US$6.60/bushel.

 

"I don't think prices will rise any further," Chino said.

 

The Russian wheat crop is not in as bad a condition as it is being made out to be, as most of the damage took place only during the three weeks to mid-July, he said.

 

Subsequent heat would not have adversely affected the wheat grain because it had already matured - and high temperature may even have increased the protein content of the crop, he added.

 

Traders said physical trade of wheat has been hard-hit by volatility in futures trade as well as the lack of availability from the Black Sea region.

 

Global trading companies supplying feed wheat to Asia, rattled by defaults from the Black Sea region, are switching their origin to European countries, several trading executives said separately Friday (Aug 20).

 

Shipment of three cargoes totalling around 165,000 tonnes of feed wheat to South Korea were initially postponed from July to August and will now be loaded from Romania and Bulgaria instead of Ukraine, a Seoul-based trader said.