February 22, 2010

 

Asia Grain Outlook on Monday: Ample supply may weigh on grain prices

 

 

Global grain prices gained marginally as the U.S. dollar retreated since late last week but the market is likely to remain under downward pressure for the rest of the month due to weak fundamentals, said trade participants.

 

"The market has been rangebound recently but now a bearish tone is expected for the next few days," said Koname Gokon, an analyst at Okato Shoji in Tokyo.

 

He said Asian demand has been sluggish in the past few weeks due to the Lunar New Year holiday and on the resumption of trading there has been increased preference for corn and soybeans from South America.

 

CBOT futures for both corn and soybeans are likely to weigh down due to lower demand in the physical market, traders said.

 

Due to the large volume of soybeans coming into the market, Brazil is facing logistical problems, said a Singapore-based trading executive.

 

To make way for the new crop of soybeans in warehouses, aggressive selling is expected of carryover stocks in corn, he said.

 

Storage-related problems may force growers and exporters to reduce their price offers as harvest gathers pace in South America.

 

Traders put the downside for CBOT corn futures at US$3.00 a bushel in the next three months from the current price levels of around US$3.60/bushel.

 

Gokon said prices may fall to around US$3.55/bushel this week.

 

The world is heading for another year of record corn output in 2009-10--possibly around 798 million tonnes--according to projections by the U.S. Department of Agriculture.

 

Among agricultural commodities, traders are most bearish on soybean prices, which are likely to fall to around US$7.00 a bushel by May due to sharp rise in global production from current levels of around US$9.54 a bushel.

 

Global soybean production is estimated up 17% on year in the current marketing year to September 2010 at 248 million tonnes, according to estimates of Food and Agriculture Organization.

 

Based on current stocks and planting data, the supply of soybeans and wheat won't tighten again for at least 12-18 months, said Scott Briggs, agricultural commodities strategist at ANZ Banking Group.

 

According to FAO estimates, global wheat stocks are projected at 183.5 million tonnes by June 2010, up 28% from two years ago.