March 2, 2009

Grain prices in Asia may stay lower in the week ahead on concerns that the current global slowdown may be prolonged after the latest U.S. data showed that the world's biggest economy slumped more deeply than previously thought in the fourth quarter.

 

In the absence of any fundamental news to drive prices, grains will move in tandem with other commodities such as crude oil, and Asian shares, which were falling at the start of the week amid worries about the health of large U.S. banks and the economy more broadly.

 

U.S. gross domestic product decreased at a seasonally adjusted 6.2% annual rate October through December. The decline meant the worst quarterly showing for GDP since a 6.4% decrease in first-quarter 1982 GDP.

 

On the other hand, news that can potentially prop up prices, such corn and soybean output in South America getting affected by the ongoing drought, has already been adequately factored in, analysts said.

 

The London-based International Grains Council said rice imports by south and southeast Asian nations may fall in 2009, as most producers report bumper harvests and importing countries' demand declines, weakening the outlook.

 

The Philippines, Asia's biggest rice importer, is expected to buy 1.8 million metric tonnes of the commodity this year compared with 2.3 million tonnes last year. Of the total, it has already bought 1.5 million tonnes from Vietnam in a single purchase.

 

Bangladesh expects its rice imports to fall around 30% to 1.1 million tonnes in 2009. Indonesia is also expected to follow suit.

 

Still, the likely decline in purchases by these countries may be offset by higher imports by nations in the Middle East, including Iran and Saudi Arabia, maintaining the overall trade in the region at last year's level of 5.6 million tonnes.

 

Separately, a U.S. Department of Agriculture report said that Thailand's rice intervention program, which began on Nov. 1 and concluded on Feb. 28, procured 6 million tonnes compared with a government target of 8 million tonnes.

 

It said that higher domestic prices since January and large shipments of parboiled rice to African countries prompted farmers to sell more of their output to the private sector, reducing government intake for the program.

 

The Thai government will now begin its intervention program for the new crop, to be harvested later this month, from March 16 and continue it until July 31. The government plans to procure 2.5 million tonnes of paddy through this program. It will likely pay US$282-US$338/tonne to farmers for paddy, the USDA report added.