Wheat prices at risk of 'spike', BarCap says

by Agrimoney.com

Wheat prices face a "spike" if the concerns over global supplies prompt export bans or accelerated stockpiling, Barclays Capital said, as Bangladesh unveiled plans to speed up its imports.

The investment bank said it was optimistic over prospects for prices of all three main Chicago-traded crops, given tight supply and demand fundamentals for soybeans and, in particular, corn, its "preferred exposure" across the agricultural commodities sector.

However, it singled out wheat as possessing the potential dynamics for a leap in prices, given the grain's dietary importance at a time when many importing countries, in the face of civil unrest, are attempting to limit food price inflation.

United Nations data on Thursday showed world food prices at a record high last month, with cereals 3% more expensive than in December.

"The rise in wheat prices and tighter supplies has led to heightened concerns in key importing countries in the Middle East and North Africa to secure supplies," BarCap said.

'Further price rises'

 Jitters have been further enhanced by fears that Russia may extend its ban on grain shipments beyond this year, or that curbs by other exporters, or panic buying by importers, could further sap available supplies.

"We expect prices to climb further in the near term of these supply concerns," the bank said.

"Spikes cannot be ruled out if countries enact export bans or importers pre-empt export restrictions and make sizeable purchases."

While large exporters, bar Ukraine, have not follow Russia in trade curbs, some smaller shippers, such as Romania, have warned of depleted stocks, and Moldova earlier this week unveiled plans for a ban.

'Frantic efforts'

The comments came as Bangladesh's state grains buyer, the Directorate General of Food, said it would increase the size of rice and wheat tenders to accelerate purchases.

"If possible, for wheat tenders we may ask for 100,000 tonnes instead of the earlier 50,000 tonnes," a directorate source told Reuters, the news agency.

Ahmed Hossain Khan, the head of the department, said that Bangladesh authorities were "making frantic efforts to import rice and wheat to ensure food security".

The move follows a similar move by Algeria, which bought at least 1.75m tonnes of wheat last month, with countries including Iraq and Jordan also busy in the import market.

'Dire situation' 

BarCap said it was particularly bullish over prices of higher quality wheat, in part because of the particular desire for food rather than feed grain, but also the poor start to America's high protein, hard red winter wheat crop.

Although overall US winter wheat seedings, for harvest this year, rose by 10%, "the bulk of the increased plantings were for soft red winter wheat, with seeded area up 47%, rather than the higher quality hard red winter wheat, where seeded area rose just 4%."

Hard red winter wheat, traded in Kansas, is furthermore deemed in poor condition following a dry start and, most lately, freezing temperatures which have provoked concerns of elevated rates of winterkill.

A lack of moisture has also dogged winter grains in China, the top wheat producing country.

"The situation has been dire in Shandong, the country's second largest wheat producing area," the bank said.

"A significant cut in China's winter wheat productions could propel international prices strongly higher." [..]

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