By Lisa Twaronite
Grain-related shares in Asia rose Friday while those of some
food processors sank, as wheat futures continued to jump, and
investors pondered the long-term impact of Russia's move to ban
wheat exports.
Russian Prime Minister Vladimir Putin announced the temporary
export ban after a drought devastated much of his country's
crop.
That news sent wheat futures soaring. Wheat for December
delivery, the most active contract, added 60 cents, or 7.9%, to
settle at $8.15 a bushel on the Chicago Board of Trade on Thursday,
the highest close for a most-active contract since August 2008,
according to FactSet Research. Chicago wheat has surged 23% just
this month.
In Asian electronic trading Friday morning, September wheat
futures were reportedly up as much as 7% a bushel, and some
investors said this might just be the beginning.
"In our view, the rise of the agro-commodities that we are
seeing now is not just a one-off thing," said Martin Hennecke,
associate director at independent financial advisory firm Tyche
Group Ltd. in Hong Kong.
"While a short-term reversal is possible, we are in the
beginning of an inflationary global environment. And
agro-commodities are coming up now from an extremely low historical
price base. It's very possible there will be a huge rally across
the whole agro-commodity sector," Hennecke said.
Trading companies that have sold Russian wheat to millers in
Asia are considering declaring force majeure on their supply
contracts, which Reuters reported could affect up to 1 million
metric tons of the grain.
But globally, the wheat supply situation doesn't seem so dire.
Several top wheat-exporting countries have forecast bumper crops,
and the U.S. -- the world's biggest exporter -- is faced with its
largest stockpile of wheat in two decades, with some economists
fearing deflation more than inflation.
Moreover, monthly data from the Australian Bureau of Statistics
released Friday showed total wheat stored by bulk grain handlers,
growers and users as of the end of June 30 surged 41% to 9.88
million tons from the same period last year, though it was down 11%
from May.
Australian wheat exports fell 19% in June from May to 1.16
million metric tons, and they were down 29% from June 2009.
Still, the soaring futures prices translated into a big
short-term lift for Australian grain and agribusiness
companies.
On Friday, shares of GrainCorp Ltd. (GNC.AU) were up 3.4%,
Elders Ltd. (ELD.AU) gained 6.4%, AWB Ltd. rose 3.7%, and PrimeAg
Australia Ltd. (PAG.AU) was up 4.9%.
Canadian-based, dual-listed Viterra Inc. (VTRAF) charged 8.0%
higher.
By contrast, the Australian benchmark S&P/ASX 200 erased
earlier gains and was down 0.1%.
"Australian grain companies are leveraged more to Australian
grain than to global grain prices, obviously, but grain stocks have
certainly been helped out by the soaring grain prices," said IG
Markets institutional dealer, Chris Weston in Sydney.
In Japan, which imports more than 80% of its wheat, shares of
Yamazaki Baking Co. (2212.TO) were down 1.0%, while the Nikkei 225
Average lost 0.1% and the broader Topix was up 0.4%.
"We have no plans (at the moment) to raise product prices,"
Yamazaki's president Nobuhiro Iijima said, according to business
daily Nikkei.
The Japanese government is expected to raise the price at which
it sells the staple to flour millers in October for the first time
in two years, based on import prices from March to August, but the
increase will likely be less than 10%, Nikkei said.
In wider regional trading, China's Shanghai Composite was up
0.1%, and Hong Kong's Hang Seng and Taiwan's Taiex each rose 0.3%
But South Korea's Kospi slipped 0.1%.