Wheat quality up by March as Australia Drops

Wheat prices may extend gains and trade at high levels until early 2011, as reduction of crops in Australia, the fourth largest exporter, in addition to the supply side, a U.S. executive Wheat Associates, said.

"The market may be necessary to go higher before it's over," said Vince Peterson, vice president of group operations abroad, in an interview in Perth. "We'll be at these higher ranks at least until the first quarter."

Wheat prices rose to a maximum of two years in August, after Russia, the third largest exporter last year, banned shipments through the country's worst drought in half a century. Wet weather is to degrade crops in Australia and the delay in harvesting after the rain had damaged the quality of the previous crop in Germany and Canada.

"There were a lot of buyers are expected to harvest in the southern hemisphere in Argentina and Australia to come to see if prices moderate somewhat, but the situation has done the opposite," said Peterson. The increased demand for U.S. wheat, the largest exporter, will depend on the crop in Australia, he said.

Wheat for March delivery on the Chicago Board of Trade rose 0.6 percent to $ 7.89 a bushel at 12:23 pm in Singapore after rising to a maximum of four months in August, $ 11 on 7 December. The price has gained 46 percent this year.

'Fragile' Market

"Frankly, what does the fragility of the wheat market really is," said Peterson. "Five months ago we'd be giving away, we had a lot."

Dry weather for the U.S. wheat crop during the winter can also help support prices in the next year, while the future will be driven by the prospect of spring planting, he said. U.S. Wheat Associates is one of Arlington, the development organization based market in Virginia.

U.S. can not have the logistical capacity to meet growing global demand, after the rains cut the crop quality in Canada and Australia, Abdolreza Abbassian, an economist at the United Nations Organization and Agriculture Organization, said in an interview .

As many as 8 million metric tons of wheat production in Australia may be downgraded by the excessive rains, while production in Canada suffered from wet weather, pushing importers to seek alternative sources said.