March 14, 2007

 

Asia Grain Outlook on Wednesday: Prices may fall on CBOT losses

 

 

Grain prices in Asia may fall during the remainder of the week as funds may continue to unwind long positions on Chicago Board of Trade grain futures.

 

Over the last two sessions, grain futures have been mostly lower, as funds and speculators have begun selling off some of their long positions at the prevailing high prices.

 

U.S.-based futures traders A G Edwards and Sons, Inc said corn futures may be falling as traders are getting nervous about a likely rise in corn acreage in the U.S. later this year and are concerned that high corn prices may be putting off feed corn buyers.

 

Since corn has been the price leader in grains for the past several months, a downturn in corn will surely affect grain prices in general.

 

But analysts point out that weather can be a big determinant of world grain output in 2007, as developing La Nina weather conditions may bring about dry weather in the U.S. later this year, while rains may improve in Australia.

 

U.S. commodities analyst Ag Resource Co. said China may halt fresh corn exports to quell rising domestic food prices.

 

ARC added that China's February food inflation level was at 6%, well above levels acceptable to the Chinese government, with rising grain prices accounting for much of the increase.

 

It said the last time Chinese food inflation levels reached such lofty levels, in the mid 1990s, China halted all corn exports and moved to import additional grain.

 

ARC, however, added that this time around, corn imports may not materialize, due to sufficient domestic supplies.

 

In potentially bullish news for the wheat market, heavy rains over the past few days in India have damaged up to 15,000 hectares of wheat crop in northern parts of the country.

 

The government, however, hasn't yet revised its estimate of 72.5 million tonnes of wheat output for 2007 versus 69.48 million tonnes in 2006.

 

Harvesting will begin next month.