February 18, 2009

Grain prices may track financial market weakness over the next few days, due to the absence of compelling fundamental factors.

Chicago Board of Trade grain prices fell sharply Tuesday, though prices barely moved in Wednesday's morning trade.

In wheat, a Commonwealth Bank of Australia analyst report said rains in the U.S. and Chinese wheat growing areas have allayed some dry weather concerns, though it added that the unirrigated part of the Indian wheat crop remained dry.

Various estimates of India's 2009 wheat crop are floating about, ranging from 75 million to 78 million tonnes.

International prices could be pressured by India's currently harvested wheat crop ending on the higher end of the output range, as the country is thought to be mulling lifting a ban on exports of both white rice and wheat.

While wheat prices are anyway facing downward pressure due to good global harvests, rice prices are particularly vulnerable to Indian exports.

According to a Thai trader, if India steps into the market, prices could take a sharp plunge. While Thailand competes with Vietnam and India for a share of the white rice market, India also competes with Thailand for parboiled rice exports, which Vietnam doesn't produce.

Thailand's export rice prices have been stable for the past month, and traders expect the price of 100% grade B rice to hover in the US$590-US$610/tonne range over the next few months, unless India allows white rice exports, in which case traders said all bets are off on the price direction.

Meanwhile, traders in Hanoi said Vietnam's white rice prices are likely to remain stable over the next several weeks, even as the country prepares for its rice harvest.

White rice prices have been rising in Vietnam in the last few weeks and currently, 5% broken rice is being quoted at US$440/tonne, free-on-board, compared with US$420/tonne a week ago.