Wheat futures contracts in Australia and the US will likely extend falls in the coming weeks as part of the global financial downturn, with further pressure added in Australia as a bumper harvest gets underway in northern areas, a futures adviser said Thursday.

 

With CBOT December wheat futures having breached a previously nominated support level at US$5.60 a bushel, the adviser, Michael Phelan of Tricom Equities Ltd., said the next level of support in the US$4.80-US$4.40 area "could quite easily" be tested in the next two weeks.

 

CBOT December wheat hit a fresh 16-month low Wednesday before closing a tad higher but still down 17.25 cents at US$5.5575/bushel, its lowest price for a nearby contract on a monthly continuation chart since June 2007.

 

Meanwhile, Australia's most active wheat futures contract - ASX January - at 0355 GMT last traded at A$272 per tonne, down A$4.50 from Wednesday's settlement.

 

This brings into view support at A$255, which also could be tested in the coming weeks, depending on moves in the Australian currency, said Phelan.

 

As an expected bumper wheat harvest gathers pace in the coming weeks in southern Queensland and northern New South Wales, the consequent sharp increase in domestic supply could add further downward pressure on ASX January, he said.

 

Phelan can't see any upside for the contract for now, only the next level of support.

 

ASX January peaked late February at A$450/tonne - the culmination of an eight-month rally from around the A$225 area. More recently, it posted an intraday high of A$392/tonne on Aug. 21 and has been in a downtrend since, losing 31 percent in value and taking the price back to a level unseen since September 2007.

 

While part of the downward pressure on wheat prices could come as hedge funds exit positions, just as fund pressure helped drive futures to their price peaks earlier in the year, the momentum in all markets is undeniable, he said.

 

"They're slamming every asset class," with equities coming off, high yielding currencies getting smashed, and commodities, including softs, he said.

 

"It's all just people looking at cashing up," he added.

 

US$1 = AUD 1.4888 (October 16, 2008)