March 13, 2009

Asian grain prices are likely to rise in coming sessions, bolstered by firmer technical cues and equity market gains, though rice prices may come under pressure from bearish supply and demand fundamentals and weak Chicago Board of Trade contracts.

 

CBOT rice futures slumped Thursday, after contracts snapped key technical support levels. CBOT's May contract has lost 79 1/2 cents in the past two days, ending Thursday 37 cents lower at US$12.07.

 

Traders said the focus will now turn to US$12 - a Jan. 30 low - as the next critical support level, with a potential breach likely to pave the way for further downside.

 

CBOT rice has come under pressure following Wednesday's U.S. Department of Agriculture supply and demand report, which raised ending stocks for both U.S. and world stocks, and lowered the average long-grain price by 50 cents.

 

Despite the weak outlook for rice, however, other grains are likely to be pulled higher by stability in other commodities and equity markets, and an increase in buying by China, said Okato Shoji Co.'s deputy research manager, Koname Gokon.

 

China's National Grain and Oils Information Center said Friday it expects the country's output of major grains in 2009 to be lower than last year, forecasting the first decline in six years.

 

The think tank projects a drop in wheat output this year of 1.3% to 111 million metric tonnes, despite a slight rise in planting acreage, as an earlier drought in major winter wheat producing areas had a negative impact on unit yields.

 

The center expects corn output in 2009 to be 163 million tonnes, down 1.5% despite a slight increase in acreage, while rice output is forecast almost unchanged at 193 million tonnes. Soybean output is likely to fall 3.2% to 15 million tonnes, it said.

 

CBOT soy futures rallied Thursday on speculative buying and short covering spurred on by strength in the U.S. stock market, along with firm crude oil and gold futures. CBOT March soybeans settled 24 cents higher at US$8.99.

 

"So long as crude oil and other commodities stay firm (CBOT) soy and corn contracts will likely test higher again next week, with US$9.20 now looking like a realistic upside target for soy contracts, and US$3.90-US$4.00 possible for corn," said Koname.

 

CBOT corn posted strong gains in Thursday's session, with the March contract up 20 3/4 cents at US$3.76 3/4 a bushel. Traders said expectations that a U.S.-based private firm would release a bullish projection for corn-planted acres on Friday, and strength in the crude oil market were key supportive factors.

 

In other news, demand for Australian wheat remains healthy ahead of what is traditionally a period of volatility for the international market, said Stuart Richardson, general manager for agribusiness AWB Ltd.'s (AWB.AU) Australian commodities unit.

 

"While the market remains relatively stable at present, the run into the northern spring normally stimulates volatility in the market," he said in a statement.

 

Concern over the condition of Hard Red Winter wheat crops in the U.S., which are experiencing dry conditions, is being offset by the slow pace of U.S. export sales and a positive outlook for crops in Europe, he said.

 

CBOT wheat also posted strong gains Thursday, lifted by positive export sales and strengthening crude oil, with the May contract up 16 3/4 cents to US$5.25 per bushel.