August 30, 2007

Asia Grain Outlook on Wednesday: Wheat prices may continue relentless rise

Wheat import prices in Asia may continue to rise in the rest of this week, as Chicago Board of Trade wheat futures are expected to continue posting gains.

Ongoing bullish fundamentals in the wheat futures market include a very tight world supply and demand balance sheet, rallies in European wheat markets this week and more talk of Australian drought conditions and wheat crop woes there.

Adding to the bullishness was news Wednesday that India's state-run State Trading Corp., or STC, received eight bids in its tender to buy 530,000 metric tons of wheat. The tender is likely to be awarded over the next several days.

The range of bids offered in this tender at US$385-US$434/ton were significantly higher than the US$317-US$330/ton prices at which STC bought 511,000 tons of wheat July 11.

Analysts in India are surprised the government is continuing to buy wheat in international markets despite a bumper domestic harvest and soaring world prices. The government seems to be erring on the side of caution, building up wheat stocks in case the 2008 crop comes up short of demand.

Meantime, rising wheat prices are unlikely to affect import volumes in Asian countries, several traders told Dow Jones Newswires.

In other news, Taiwan Sugar Corp. canceled a tender to buy an unspecified quantity of corn and soybean Wednesday, the second time this month it has rejected bids in a tender to buy the grains.

Rejections of bids in buying grains have been on the rise over the past several weeks, as international grains prices continue to rise.

However, Asian buyers may get to buy cheaper corn in coming weeks, as expectations of a record U.S. corn harvest in coming months is pushing down CBOT futures prices, with the downward trend expected to continue.