September 26, 2007
Asia Grain Outlook on Wednesday: Wheat prices may rise on Australia news
Prices of imported wheat in Asia are likely to keep rising through the rest of this week as bad news continues to pour in from Australia.
The most-active December wheat contract on the Chicago Board of Trade is currently up 6.2 cents at US$8.93 a bushel in Asian trading hours.
Australia, one of the world's major wheat exporters, is struggling with dry weather for the second year in a row.
Wednesday, Australia's Agriculture Minister Peter McGauran said production from the new wheat crop might be about the same level as the drought-hit crop in 2006, which produced 10 million metric tonnes.
Earlier estimates put Australia's wheat crop at 15 million to 16 million tonnes.
McGauran added that if this estimate were to prove correct, Australia may only have a "few million tonnes" of wheat to export in the global wheat marketing year ending June 30, 2008.
Australia's wheat harvesting will begin in November.
In the meantime, demand for wheat in Asia continues to mount. While India is still considering whether to import more wheat, state-run Trading Corporation of Pakistan floated a tender Tuesday seeking 100,000 tonnes of imported wheat to be concluded Oct. 8.
The short-term forecast for wheat futures remains bullish.
"A struggling supply side, coupled with positive demand and market tightness highlighted by the extremely tight inventory situation, has propped prices to all-time highs. Over the near term, we don't expect this market tightness to dissipate," said a Barclays Capital analyst report.
So far, except for Russia and the U.S., all major wheat exporting nations such as Canada, the European Union, Argentina, Ukraine and Australia are likely to have less wheat to export in the 2007-08 marketing year.
In other crops, both corn and soybean prices may remain subdued in the near term as the U.S. harvest picks up pace. But analysts said the sharp rise in wheat futures may lead to sympathetic gains in both these commodities.
