January 28, 2008

 

Asia Grains Outlook on Monday: Wheat, soybean prices may rise further

 

 

Wheat and soybean prices are likely to keep rising in the week ahead, as global demand remains robust, but the trend for corn is unclear.

 

On the Chicago Board of Trade, both wheat and soybean futures ended higher in Friday's U.S. trading.

 

CBOT wheat futures continued to gain in Asian trading Monday, building on Friday's U.S. gains, as export demand for U.S. wheat is still robust. While long-range fundamentals for wheat remain bullish, some pressure on prices may be felt this week, as Argentina is considering resuming wheat exports after being closed to new deals since December last year.

 

At 0600 GMT, the CBOT March wheat contract was 14 U.S. cents higher at US$9.47/bushel.

 

In Asia, South Korean demand for corn is expected to be sluggish over the next several weeks, as traders are well-covered until September.

 

A trader in Seoul said that while traders are tempted to buy more corn, given the drastic drop in ocean freight costs over the past few months, they are continuing to watch the market more closely in expectation that these costs will fall more.

 

Apart from traditional corn exporters such as the U.S. and South America, India has stepped up its corn exports this year, with analysts saying the country may export up to 1.5 million metric tonnes in the first three months of 2008.

 

India has taken advantage of China's absence from corn export markets since last year to build a presence for Indian corn in East Asia and Middle Eastern markets.

 

China hasn't issued corn export quotas since last March and imposed an export tax of 5%-25% on grains such as rice, corn and wheat, and soybeans.

 

A Seoul trader said South Korean buyers have bought around 15,000 tonnes of Indian corn over the past few weeks.

 

Chinese soybean buying is likely to remain brisk in the week ahead, as traders take advantage of lower ocean freight costs.

 

Chinese traders booked 15-17 soybean cargoes, mostly from South America, in the week ended Jan. 25, up from 10-11 cargoes in the preceding week, commodities analysis firm Shanghai JCI said in a report.

 

"The main reason for the rise in soybean imports is (lower) freight costs. The freight rate (for Panamax-sized cargo) from U.S. Gulf to China is now at US$94 per metric tonne, from US$110/tonne in early January," said the report.