October 10, 2007

 

Asia Grain Outlook on Wednesday: Wheat prices may keep falling on CBOT

 

 

Asian buyers are likely to keep enjoying lower wheat import prices in the rest of the week, as Chicago Board of Trade wheat futures keep tumbling.

 

In terms of long-term fundamentals, wheat looks strong with inventories at 30-year lows and production shortfalls in major producing countries.

 

But most of these factors have already been taken into account by the market and an absence of fresh bullish factors is driving down prices.

 

On Tuesday, CBOT benchmark December wheat closed at US$8.45 a bushel, the lowest close since Sept. 19. This proved to be a bargain hunting opportunity for some traders, pushing up wheat prices in trading during Asian hours.

 

The December contract was up 6.4 cents at US$8.52/bushel at 0724 GMT.

 

CBOT December wheat has immediate technical support at US$8.15/bushel, followed by stronger support at around US$7.72/bushel, Dow Jones' technical analysis shows.

 

Meantime, India made an unexpected decision Tuesday, banning all non-basmati rice exports.

 

Basmati, a specialty fragrant rice, sells at a premium to common varieties of rice. But the bulk of India's rice exports consist of white rice and parboiled rice.

 

Traders in India are upset with the government decision, saying it will lead to losses for them as Indian traders have already contracted to export up to 1 million metric tonnes.

 

Many Indian traders said global rice prices may rise by up to 10% over the next several months, as India has a 12.5% share in the global rice export market.

 

A trader in Bangkok said he didn't expect Thai rice prices to be affected at all by India's decision, as Thai rice has a different quality and different set of customers than Indian rice.

 

"I think its unlikely that Indian rice buyers will switch to Thai rice, as we sell rice of a completely different quality," said the trader.