February 7, 2007

 

Asia Grain Outlook on Wednesday: Corn, wheat premiums may fall On CBOT

 

  

Premiums for corn and wheat delivered to Asia may continue falling for the rest of the week, as Chicago Board of Trade corn and wheat futures are expected to extend their losses.

 

In the case of corn, the March front-month contract is hovering around psychological key US$4/bushel. It closed at US$3.96/bushel Tuesday.

 

For wheat, the dampener is weak export demand for U.S. wheat. March CBOT wheat fell 2 3/4 cents to US$4.58 1/2 Tuesday.

 

Soybeans, on the other hand, are evenly poised. Market participants are keen on pushing up soybean futures since a very large price gap between corn and soybeans will lead to sharp cuts in soybean acreage in the U.S.

 

March CBOT soybeans closed 1 1/4 cents lower at US$7.38 3/4 per bushel Tuesday.

 

Potentially significant news for wheat prices globally was the Indian federal government's estimate of 72.5 million metric tonnes for India's 2007 wheat production, down from its earlier projections of 74 million tonnes.

 

India produced 69.35 million tonnes of wheat in 2006.

 

The government will be regularly updating its output estimate throughout this year.

 

Since India imported around 6.5 million tonnes wheat in 2006, supporting global wheat prices year round, a repeat of last year's low wheat output in 2007 may again spur the Indian government and private traders to import large quantities of wheat.

 

Already, some analysts have said high February temperatures in wheat-growing areas in North India so far may have an adverse impact on wheat productivity.

 

Wheat harvesting in India will begin in earnest next month.

 

In other wheat news, Japan's Ministry of Agriculture is seeking a total of 160,000 tonnes of wheat from the U.S., Canada and Australia in a tender to be concluded Thursday.

 

Meantime in China, commodities analysis firm JCI Shanghai said Chinese soymeal prices have risen sharply this week, tracking gains in CBOT soy futures.

 

As an illustration of this gain, JCI said cash market quotes for soymeal were RMB2,300/tonne-RMB2,420/tonne Jan. 5, up by almost RMB80-RMB110 compared with last Friday's prices.

 

Analysts said that apart from support from CBOT soybean futures, the rising prices in the Chinese soymeal market can also be attributed to crushers and feed mills having low soymeal stocks.

 

Most Chinese feed mills have started to replenish their stocks to cover an expected rise in demand during the upcoming Lunar New Year holiday.