A sudden jump in global grain demand thanks to Iraq and Asia will eat into already tight world stocks and keep prices on the boil, analysts said on Wednesday.
New buying activity from Baghdad to Bangkok has shaken the world market into life as Asian livestock feed makers emerge from the bird flu crisis and the United Nations seeks a million tonnes of wheat for Iraq.
Add to that fresh buying tenders from Tunisia and major importer Egypt and you have the ingredients for a price rally.
"We are seeing new demand coming in and with world stocks tight, this should hold up prices," analyst James Dunsterville of Geneva-based AgriNews said.
The World Grains Council (IGC) last month pegged world wheat output at a nine-year low of 557 million tonnes, cutting end stocks to 131 million tonnes from 163 million a year earlier.
US futures jumped on news on Tuesday that the United States had won its first major wheat sale to Iraq in more than six years after the UN World Food Programme issued a 450,000 tonne tender. The WFP has said it is seeking a further 630,000 tonnes.
On Wednesday, market sources said the WFP had bought 160,000 tonnes of US wheat and 110,000 tonnes of Argentine grain.
Egypt's main official buyer, the General Authority of Supply of Commodities (GASC), said it had bought about 120,000 tonnes of US wheat at its tender.
"On the demand side, it's all looking pretty solid," analyst Kieran Carvill of analysts A2Z Grain said, but added it was too soon to talk of adjusting global stock figures as a result.
"But things are tightening up a bit," he added.
Europe's main exporter France continues to be priced out of the world market after a disastrous crop last year cut supplies and pushed prices above other origins. Analysts said France was unlikely to win even Tunisia's business, despite historic ties.
"French prices are not even close to competing with other origins," Dunsterville said.
The other factor likely to keep international grain prices high in the coming months is the rally in US soyabeans, which analysts said was spilling over into other markets.
Soyabeans are hitting their highest levels in more than 15 years amid strong global demand and worries about bad weather in major growers in South America, which some fear could cut output significantly since the last official estimates. "We could see around nine million tonnes taken out of the South American crop. It's somewhat frightening," Carvill said.
Analysts said this was feeding through to US corn prices, which in turn was helping wheat.
"So if the bean market holds up, the others will have difficulty coming off," Dunsterville said.
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