Wheat prices may extend gains and trade at high levels through early 2011 as crop downgrades in Australia, the fourth-largest shipper, add to supply concerns, a U.S. Wheat Associates executive said.
“The market may need to go higher before it is all over with,” Vince Peterson, the group’s vice-president of overseas operations, said in an interview in Perth. “We are going to be in these higher ranges at least through the first quarter.”
Wheat prices surged to a two-year high in August after Russia, the third-largest exporter last year, banned shipments amid the country’s worst drought in half a century. Wet weather is downgrading crops in Australia and delaying the harvest after rainfall had earlier damaged crop quality in Germany and Canada.
“There were a lot of buyers that were waiting for the southern hemisphere crop in Argentina and Australia to come in to see if that would moderate prices a little bit, but the situation has just done the opposite,” Peterson said. Increased demand for wheat from the U.S., the largest shipper, will depend on the Australian harvest, he said.
Wheat for March delivery on the Chicago Board of Trade rose 0.6 percent to $7.89 a bushel at 12:23 p.m. in Singapore after rising to a four-month high of $8.11 on Dec. 7. The price has gained 46 percent this year.
“Frankly it tells you how fragile this wheat market really is,” Peterson said. “Five months ago we were going to be giving it away, we thought we had so much.”
Dry weather for the U.S. winter-wheat crop may also help to underpin prices into next year, while futures will be driven by the outlook for spring plantings, he said. The U.S. Wheat Associates is an Arlington, Virginia-based market development organization.
The U.S. may not have the logistical capacity to meet rising global demand, after rains cut the quality of the harvest in Canada and Australia, Abdolreza Abbassian, an economist at the United Nations’ Food & Agriculture Organization, said in an interview.
As much as 8 million metric tons of Australia’s wheat harvest may be downgraded because of excessive rains, while Canada’s output suffered from wet weather, pushing importers to seek alternative supplies, he said.
To contact the reporter on this story: Wendy Pugh in Melbourne at email@example.com
To contact the editor responsible for this story: James Poole at firstname.lastname@example.org