The major wheat growers had harvested big crops, but new demand linked to biofuels, economic growth in India and China and declining world stocks pointed to higher prices from January onwards, Dan Basse, president of AgResource in Chicago, said.
"We're not likely to see much price movement for six to eight weeks, but in early 2006 we could see the return of a bull market," he told the Globalgrain2005 conference in Geneva.
Demand for biofuels in the European Union was ex
pected to rise sharply next year, and take an increasing share of rapeseed oil production.
Rapeseed oil consumption was seen rising to almost six million tonnes in 2006, up from just over four million in 2004.
China and India's growing prosperity, coupled with declining wheat stocks in both countries, was likely to bring them back to the international market as importers next year.
"There is a rumour in the market that India will become a major importer. Looking at their stock levels, I bet they will be looking for two million tonnes of wheat in 2006," he said.
Basse said Indian wheat stocks had dropped from above 20 million tonnes in 2002, and forecast them at around two million in 2006. India has been a net exporter since 2000.
Similarly China's wheat stocks were now at their lowest since the early 1980s at just above 30 million tones. He forecast imports at around five million tonnes in 2006.
In addition, Iraq was re-emerging as a major world buyer and could take more than 3.5 million tonnes of wheat next year.
But there are still bearish factors in the market, and some sort of extra supply shock would be needed next year to see a dynamic upward move in the wheat price, he said.
He said dryness in the Black Sea region was expected to reduce crops in Russia and Ukraine next year, although there were still big crops elsewhere.
The spread of bird flu was also a worry and could affect feed demand. The emergence of a strain that could pass easily among humans would also have a devastating impact on trade with any country affected, he added.
But bullish factors outnumbered the bearish, and European and Black Sea wheat prices had probably already seen their lows for the season. Basse said wheat should lead the way for agricultural commodities in 2006, followed by corn and then soybeans.
Another factor was growing speculative interest in commodities, which generally tended to be bullish for markets.
He said traditional commodity fund investment had risen from around $50 billion in 2003 to around $140 billion this year and was expected to top $160 billion in 2006.