November 5, 2007

 

Asia Grain Outlook on Monday: Wheat prices lifted by crude, new demand

 

 

Asian buyers may face slightly higher prices for wheat as futures prices of the grain bounced Friday on borrowed strength from outside markets and strong physical demand, said analysts Monday.

 

U.S. wheat closed mostly higher Friday after slumping Thursday, when profit-taking in crude oil weighed on prices.

 

"The market was a bit oversold on Thursday, so short covering also supported prices on Friday," said a trader based in Singapore.

 

Chicago Board of Trade December wheat ended up 1/4 cent at US$7.78 1/2 per bushel, Kansas City Board of Trade December wheat rose 1 3/4 cents to US$8.06 1/4 and Minneapolis Grain Exchange December wheat settled up 7 1/2 cents at US$8.13 1/2.

 

A sale of 60,000 metric tons of U.S. wheat to Egypt provided price support as traders hadn't expected it, said traders.

 

"The trade shows that U.S. wheat prices are still competitive internationally, no doubt with the help of a weaker dollar," said a trader based in Hong Kong.

 

Overall, analysts agree that wheat prices in 2007 have run out of steam after the massive rally of August and September.

 

"2008 crop prices are still high as wheat must present an effective bid in the turf war, or battle for farm acreage," said an analyst.

 

In India, the world's second-largest wheat consumer, farmers have sown 184,000 hectares of wheat in the ongoing winter planting, around 36% more than a year ago.

 

More sugar farmers in India have been switching to wheat due to low sugar prices and the high fixed price that the government has announced for wheat. The intervention price of wheat for 2008 was increased by INR1,500/tonne to INR10,000/tonne.

 

The intervention price is the fixed price at which the government purchases wheat from farmers to encourage domestic production and maintain a buffer stock.

 

India may float a tender to import 330,000 tonnes of wheat this week, a senior government official said. The country plans to import 1 million tonnes of wheat from December to March 2008.