December 3, 2011

Asian wheat prices expected to increase

Asian milling wheat prices are expected to go up this month amid lower output in the US and heavy rains in Australia, according to a Dow Jones report.

The Chicago Board of Trade's most active March wheat rose 1/4 cent Thursday (Dec 1) to US$6.1425 a bushel. Traders expect the premium of higher-protein wheat grades to the lower-protein soft wheat traded at CBOT to widen this month.

March Kansas City Board of Trade Hard Red Winter wheat climbed 8 cents to US$6.69 Thursday. The premium to CBOT may widen to 88 cents this month, traders said. Meanwhile, March MGEX spring wheat ended 8 3/4 cents higher at US$8.3225, and traders said they expect it to breach US$8.50/bushel by the end of the year on the back of tight supply of premium grades.

Buyers of hard winter and spring wheat should lock-in their supplies while prices are still relatively low, because an increase is in the cards, a London-based commodities analyst said.

Taiwan is seeking close to 83,000 tonnes of US wheat in a tender next week, with the purchase price likely to be higher than was offered in a November 18 tender.

It seems Taiwan wants to make the purchase before the monthly USDA issues its monthly supply-and-demand report, which could see a reduced production estimate, traders said.

Cash premiums for Australian Prime Hard, or APH, wheat to corresponding Kansas wheat futures have also rallied strongly in recent weeks due to the heavy rainfall in New South Wales. According to industry estimates, the quality of at least 1.5 million tonnes of wheat has been downgraded from high-protein milling grade to lower-protein milling and feed grades.

New South Wales state is forecast to produce 7.7 million tonnes, or 29% of Australia's wheat output this marketing year that started Ocober. 1, while Victoria state, which is also affected by rainfall, will produce around 3.3 million tonnes, or 13% of the Australian total, according to a government forecast.

APH wheat, which usually contains a minimum 13% protein and a maximum 12.5% moisture, was offered earlier this week around US$316/tonne at Newcastle port, a premium of US$78/tonne to Kansas wheat futures, up from US$45/tonne, a month ago, ANZ Banking Group said in a report. In other ports, such as Geelong and Adelaide, where it was available at a discount of US$8-US$14/tonne to Kansas, it is now being quoted at a premium of US$8-US$10/tonne, ANZ said.