SYDNEY: Wheat prices are "on the cusp" of a slump as rising European production and increased global stockpiles drive Chicago futures lower, according to the ANZ.
Prices on the Chicago Board of Trade are likely to drop below US$4.50 a bushel and there's a "possibility" the price will return to the two-year low of US$4.3925 reached in October, said ANZ agricultural commodities strategist Scott Briggs.
Wheat futures have declined 11 per cent this year because of rising supplies and favourable weather in growing areas.
World inventories will gain for a third consecutive year in 2010-2011, the US Department of Agriculture forecast this week.
"There has been a build in global stocks and that can't keep going, so prices have to go to a level that forces producers to stop producing so much," Briggs said.
Prices last year dropped after May, following a speculator-driven rally and as European Union output reached the market, he said.
Wheat for July delivery in Chicago gained 0.3 per cent to US$4.805 at midday Melbourne time, after dropping on Thursday to a two-week low.
Futures have traded between US$4.605 and US$5.17 since the start of April.
- BLOOMBERG
AdvertisementAdvertise with NZME.
Latest from Business
Bruce Cotterill: After six months is the Government on the right track?
OPINION: Momentum is on the rise, but plenty more to do.