January 2, 2009

South American weather is likely to determine grains prices next week.

During Chicago Board of Trade's U.S. pit-trade Friday, if forecasts are for a hot and dry weather next week in South American, "we will see a sharp rally (in grains futures) as sidelined money pours in long," said Tim Hannagan, an analyst with U.S.-based commodities brokerage Alaron.

Dry weather in Brazil and Argentina over the past few weeks has slowed down planting of soybeans in these two major producing countries. Since there isn't much fundamental factors driving corn and wheat right now, these two grains may follow soybean's cues.

Hannagan said that Chicago Board of Trade March soybean contract could test resistance at US$10.20/bushel, if forecasts predict more dry weather in South America.

Wednesday, CBOT March soybeans finished 27 cents higher at US$9.80/bushel. Trading will resume later Friday in U.S. hours.

Analysts said that since demand in China, the world's biggest soybean importer, continues to be strong, drier weather in South America over January could divert demand to U.S. soybeans, pushing prices higher.

January is a critical month for grains prices in general, as farmers in the U.S. and elsewhere will be looking at global prices closely for cues on what they should plant next year.

In other news, India's food ministry cleared a proposal for exporting 600,000 metric tonnes wheat to Afghanistan, as the south Asian nation permitted shipments after two years during which it was a net wheat importer.

India's federal government plans to export 2 million tonnes of wheat over the next several months in inter-government deals, following a bumper harvest last year, as it has sufficient stocks to meet domestic needs.

The country's confidence about its food security in 2009 has been further bolstered by smooth ongoing sowing operations for the current wheat crop, which will be harvested in April this year.