February 28, 2007

 

Asia Grain Outlook on Wednesday: Premiums seen up on strong US fundamentals

  

 

Premiums of grains delivered to Asia may rise in the remaining part of the week, disregarding the fall in Chicago Board of Trade futures over the past two sessions.

 

Grains futures fell Tuesday, largely reacting to losses on Chinese stock markets and anxiety about slowing economic growth in China.

 

However, analysts said the fall in grains futures is most likely a temporary correction and the market may soon return to gains, as supply-demand fundamentals remain strong.

 

Meantime, Doug Houghton, an analyst with Brock Associates in the U.S. told online trade publication Corn eDigest that corn futures may climb above the 10-year highs reached last week, and peak ahead of the March 30 U.S. Department of Agriculture crop report, which is likely to indicate that the number of domestic acres planted with corn isn't sufficient to meet rising demand.

 

He said the report "could easily be the most bullish news the market sees all year."

 

In Asia, some buying in wheat has taken place this week, though corn buying has been sluggish.

 

Tuesday, three South Korean flour mills - Daehan, Daesun and Samhwa - have bought 20,600 metric tonnes of U.S. No. 1 wheat from trading house Toepfer.

 

Meantime, Japan's Ministry of Agriculture, Forestry and Fisheries is seeking 150,000 tonnes of wheat in a tender to be concluded Thursday.

 

In other news, the USDA's forecast of India importing 3 million tonnes of wheat in 2007-08 (April-March) may support global wheat prices over the next several weeks, said Mark Samson, vice president of U.S. Wheat Associates in South Asia.

 

The USDA said in a report late Monday that while India's government had forecast 72 million tonnes of wheat output in 2007, up 3.6% on year, low carryover stocks from 2006-07 would likely lead the country to import wheat for the second year in row.

 

Harvesting of India's wheat crop will begin next month and conclude in April.

 

"My feeling is the USDA forecast is quite close to the mark. I think 3 million tonnes is the minimum imports India could make in 2007-08 if it does produce 72.5 million tonnes," said Samson.

 

He added that India needed to import wheat to build its grains reserves and also have enough wheat to sell to low-income families through its public distribution programs.

 

However, if India's wheat crop falls below 72.5 million tonnes, imports could rise, with the upper end likely around 6.5 million tonnes, unchanged from 2006-07 (April-March), Samson said.