Wheat prices may fall further as exporters compete aggressively for business with feed quality supplies abundant and global production set to soar to a record level, Rabobank said on Monday.
"Export pressure over the coming months indicate that there is further risk to the downside for world wheat prices although high quality milling wheat categories are likely to trade at a significant premium due to an abundance of lower quality grades this season," the agri-bank said in a monthly market report.
Rabobank forecast world wheat production in 2008/09 at 658 million tonnes, marginally below an International Grains Council forecast issued last week of 662 million. The IGC estimated the wheat crop in 2007/08 at 608 million.
Wheat prices have fallen sharply during the last few months, closing at $7.94 a bushel on Friday, down about 40 percent from a peak in February of $13.34-1/2 a bushel, basis the front month on the Chicago Board of Trade . The market has, however, stabilised in recent weeks.
"Wheat prices have remained relatively resilient throughout July, despite...an underlying bearish fundamental outlook for the wheat balance in the 2008/09 season," Rabobank said. "A disconnect between the futures and cash markets meant fundamental changes failed to flow through to futures markets fully," the report said. Rabobank said US cash markets were at a significant discount to futures "in an attempt to gain some export business against the aggressively priced Black Sea crops."