September 12, 2007

Asia Grain Outlook on Wednesday: Wheat may keep rising on global shortage

Importers in Asia will have to continue paying higher prices for wheat the rest of this week, as international wheat prices will likely continue rising relentlessly in the near term.

Chicago Board of Trade wheat futures are at record highs, buoyed by expectations that the U.S. Department of Agriculture will soon cut its wheat output estimates for Canada, the European Union, Australia and Argentina because of bad weather.

In morning trade Wednesday, CBOT wheat December and March 2008 contracts extended their gains and crossed the psychologically significant $9/bushel mark.

Global wheat supplies remain very tight, with stocks at multi-decade lows. With wheat crops struggling around the world, the U.S. is now the only major wheat exporter with a good harvest and enough wheat to export.

Australia is the major unknown in world wheat prices right now, with wildly varying estimates coming out daily between 12 million and 19 million tonnes. Whether rains fall in parched Australian wheat fields in the coming weeks will determine whether the crop will come on the high or low side of this range.

Iraq, Egypt and India are active buyers in the wheat markets, with the Indian government recently buying 795,000 tonnes wheat in a tender.

Indian government officials said the country is planning to buy several million tonnes more wheat over the next several months, as the country seeks to shore up its wheat stocks, likely further inflaming prices.

Wheat prices may calm only late next year, when wheat planting around the world is likely to rise substantially in response to record high prices this year.

In expected deals, Japan's Ministry of Agriculture is seeking 155,000 metric tonnes of imported wheat in a tender to be concluded Thursday.