January 23, 2008

Asia Grains Outlook on Wednesday: Prices likely to track financial markets

Grains prices in Asia are likely to follow financial markets closely as the global equities turmoil overshadows the fundamentals of the market.

"We're not suggesting there might not be some fundamental issues arising from slower global growth - just that it's not the main driver right now," said a Commonwealth Bank of Australia research note on Wednesday.

Overnight, Chicago Board of Trade corn, wheat and soybean futures fell heavily, as a Federal Reserve interest rate cut failed to impress grains traders.

U.S.-based analyst Shawn McCambridge told Dow Jones Newswires overnight, "Right now there are a lot of concerns on the projected economic turmoil that's out there and how it relates to our (wheat) markets."

A trader in Singapore said that despite the falling prices, traders are unlikely to come out and shop for grains in global markets as they anticipate even lower prices on concerns about a global economic slowdown.

In other news, Japan's Ministry of Agriculture will likely buy 215,000 tonnes of wheat in a tender Thursday.

Earlier this week, the state-run Trading Corporation of Pakistan finalized the purchase of 510,000 tonnes of wheat, with 410,000 tonnes of red wheat to be bought at US$467/tonne. It is still negotiating the price for the remaining 100,000 tonnes.

"I am surprised that Pakistan was able to buy wheat at such low prices in a tight wheat market. My guess is the wheat will be sourced from Argentina, Russia, Kazakhastan and maybe some from Canada. There's unlikely to be any U.S. wheat that will be supplied at this price," an analyst in Singapore said.